Section 998 Offers In Post “Me Too” Employment Litigation

In response to the “Me Too” movement, originally a viral social media campaign to raise awareness of sexual harassment and sexual assault (particularly in the workplace), new California laws provide plaintiffs in FEHA claims fewer hurdles to recover damages.  In particular, Government Code section 12965(b) could drastically change employment defense strategy with regard to Code of Civil Procedure section 998 offers.

Section 998, enacted in an effort to encourage parties to settle cases, allows a party to offer to settle the case at least 10 days before trial.  If the responding party rejects the offer but obtains a less favorable result, the rejecting party cannot recover their post-offer costs, and the offering party is entitled to their post-offer costs and potentially their expert witness fees.  A successful 998 offer could flip a case for the defense because costs associated with going to trial often dwarf a judgment on the merits.

The new law, however, changes the dynamics of 998 offers when the defense would otherwise recover post-offer costs.  As of January 1, 2019, even if a 998 offer is larger than the plaintiff’s judgment in a FEHA case, the defense cannot recover its post-offer costs unless the defense proves the claim was frivolous, unreasonable, or groundless when brought.

This change undoubtedly tips the scales towards plaintiffs in FEHA claims.  However, although Government Code section 12965(b) closes avenues of recovery for the defense, it does not mean that a 998 offer is now a worthless defense strategy.  Employers should still use 998 offers in pursuit of settlement.  A successful 998 offer from the defendant still prevents the plaintiff from recovering their post-offer costs.  And if a claim is frivolous, unreasonable, or groundless when brought, the defense can recover their post-offer costs.  Finally, a successful 998 offer could be used to dissuade a court from awarding a large fee to the plaintiff’s attorney.