Labor Logic

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John D. Finerty, Jr.

For years, employers and employer groups have tried to convince state law-makers to curb the increasing number of employment-related claims filed with state agencies. State and federal court lawsuits can be expensive; but, filing a discrimination claim with the Wisconsin Department of Workforce Development costs nothing and, until recently, carried no risks even if the case was entirely meritless. The Wisconsin legislature took a small step this spring to change the costs and risks of filing frivolous claims.

Wisconsin Act 118

The new Jobs Creation Act of 2003 (Wis. Act 118) created § 227.483 of the Statutes. The Act was signed into law on Dec. 3, 2003 and became effective on Feb. 6, 2004. The Act’s primary purpose was reform of regulations administered by the Department of Natural Resources. For example, the Act addressed navigable waters regulations and state air pollution programs. The Act, however, also contained an attorney fee shifting provision that, if applied broadly, will change how the Department of Workforce Development addressed meritless discrimination charges.

The new statute mandates that a hearing examiner “shall” award costs and reasonable attorney’s fees to a successful party incurred as a result of a frivolous claim.

Specifically, § 227.483(1) reads as follows:

“If a hearing examiner finds, at any time during the proceeding, that an administrative hearing commenced or continued by a petitioner or a claim or defense used by a party is frivolous, the hearing examiner shall award the successful party the costs and reasonable attorney fees that are directly attributable to responding to the frivolous petition, claim, or defense.” 2003 Wis. Act 118, Sec. 173.

The Act also created authority for the hearing examiner to apportion an award of fees against a party — or the party’s attorney. Specifically, § 227.483(2) reads as follows:

“If the costs and fees awarded under sub. (1) are awarded against the party other than a public agency, those costs may be assessed fully against either the party or the attorney representing the party or may be assessed so that the party and the attorney each pay a portion of the costs and fees.” Id.

To find that a claim or defense was frivolous, however, the hearing examiner must first find that it was “commenced, used or continued in bad faith, solely for the purposes of harassing or maliciously injuring another”; and, that the party or attorney knew or should have known the claim or defense had no reasonable basis in law or equity and “could not be supported by a good faith argument for an extension modification, or reversal of existing law.” Id.

Act 118 May Reverse LIRC

Precedent in Employment Cases

The Labor & Industry Review Commission, the agency that hears appeals from employment discrimination cases decided by hearing examiners, has held that the Wisconsin Fair Employment Act does not allow the Department to order any type of relief to a prevailing employer, including attorney fees. See Dobbs v. Super 8 Motel (LIRC 10/15/96); see also Kasonda v. Aldridge, Inc. (LIRC 11/30/93).

In fact, LIRC has further held that it will not reduce a Department award of fees even when the Commission reversed a portion of the case before the Department. See Savage v. Stroh Container (LIRC 9/20/89). By applying Wis. Stats. § 227.483 to Equal Rights Division proceedings, this precedent would be effectively reversed in frivolous cases.

For more information contact John D. Finerty, Jr. at Michael Best & Friedrich at (414) 225-8269 or on the Internet at [email protected].