Value Insights: Delivering Value In Labor and Employment Law

Value Insights: Delivering Value In Labor and Employment Law A survey of in-house decision makers on labor and employment matters

FROM THE DESK OF ELISE M. BLOOM The business world continues to change at a rapid and somewhat unpredictable pace. The pressures to not only reduce legal spend but to foresee and manage risk are particularly acute for those in-house lawyers responsible for labor and employment matters. With the focus on federal deregulation, we have seen increased activity at the state and local levels surrounding the scope of protections under the discrimination, leave and wage and hour laws. The continued threat of expensive, time consuming and publicity attracting class actions persists. The directive to “do more with less” while developing and implementing uniform and nationally compliant human resources policies has created additional challenges for in-house lawyers. With the establishment of the gig economy, the pressure to remain competitive and retain talent has further complicated the role of labor and employment lawyers in navigating the changing business environment and partnering with their business colleagues. We often are asked by our clients about how their colleagues at other companies are addressing these issues. To help labor and employment in-house counsel position their legal departments as value-add business partners to their organizations, Proskauer launched our second Value Insights: Delivering Value in Labor and Employment Law survey. Serving as a benchmarking tool which highlights unique insight on how their peers address key challenges, this report will help inhouse counsel to better maximize the performance of their own legal team; optimize partnerships with outside counsel; enhance collaboration with HR and other business units; and manage and mitigate labor and employment risk in an efficient, cost-effective manner. We want to thank all participants for their significant contributions to the development of this survey and for the insights they shared, including our Advisory Committee, our Proskauer labor and employment alums and those who responded to the survey. Understanding the importance of seeking value, asking questions and sharing perspectives, collectively we can continue to strive for innovation as we navigate through the legal landscape and today’s workplace. If you have any questions or comments, we would love to hear from you.

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Elise M. Bloom Partner, Proskauer Labor & Employment Law Department Immediate Past Member, Executive Committee Co-head, Class & Collective Actions Practice Co-chair, Labor & Employment Law Department +1.212.969.3410 [email protected]

Contents Key Findings 1 Methodology 3 Respondent Profile 4 Key Challenges Affecting In-House Counsel Today 5 Maximizing the In-House Legal Department 6 Cost Management & Optimizing the Use of External Counsel 14 Working In Partnership with the HR Function and Business Units 28 Managing Risk to the Business 32 Working in Partnership with the Board 34 Closing Thoughts 38

Key Findings • The average in-house legal team is comprised of 20 lawyers, 3 of whom handle labor and employment work. Only 1 in-house lawyer focuses solely on labor and employment. • 11% of in-house legal teams were able to increase headcount in the past year. • Responsibilities of the in-house legal team: 79% of advice and counseling is handled by in-house counsel, and this consumes 45% of their time. 76% of litigation is handled by outside counsel, and this only consumes 20% of in-house counsel’s time. • In the past year, the average number of labor and employment related claims received were 12 threats of litigation or demands from potential plaintiffs, 9 administrative charges and 5 non-class action lawsuits. • 1 in 5 businesses faced a class action lawsuit in the past twelve months. Collectively, the respondents faced 125 class actions in the past year. • While discrimination claims were the most common (and predicted to increase), respondents were most concerned with wage and hour claims as these often arise in class action disputes. • On average, respondents spent $4 million a year on outside legal counsel. • One-third of businesses did not set a budget for legal spend. Of the 69% who set a budget, only 36% met it. • Unpredictability in budgeting and labor and employment legal spend emerged as a theme: 24% of respondents expect to increase legal spend, while the same percentage expect to decrease legal spend. • The average business works with 4 firms for labor and employment matters and nearly one-quarter fired a law firm in the past 12 months. • 34% of respondents use AFAs for at least some labor and employment work, with litigation being the most common type of work billed on a non-hourly basis. • 76% of respondents meet regularly with the Head of Human Resources and/or Business Units. • 81% of respondents have taken steps to mitigate and manage labor and employment risk. • Only 9% of respondents sit on the Board of their company. No respondents in a labor and employment role sit on the Board, however, 20% of those respondents provide input to the Board.

2017 Value Insights 1

Advisory Committee Members We would like to thank the members of our Advisory Board Committee who shared their experience and insight to help structure and guide the development of this research. Mylene Brooks Executive Director, HR Compliance and Labor Relations, Cedars-Sinai Medical Center Bill Daley Vice President and Chief Counsel - Labor, Employment & Compliance, Conagra Brands, Inc. Susan Haller Vice President and Chief Litigation Counsel, Sprint Corporation Neil Rosolinsky Executive Vice President and Deputy General Counsel, Litigation & Employment, Citizens Financial Group, Inc. Niloofar Shepherd Executive, Office of the General Counsel, Creative Artists Agency Thomas Sparno Senior Vice President, General Counsel and Secretary, Schindler Elevator Corporation Tracey Tiska Associate General Counsel, McGraw-Hill Education

2 Proskauer Labor & Employment

Methodology We began the 2017 research by revisiting the findings from our inaugural survey, in which we explored trends in handling labor and employment matters. In that survey we looked at: • Data on the structure and size of in-house legal departments and how businesses utilize external counsel to provide a basis from which they could compare and benchmark their own approach. • How businesses measure the value that in-house legal departments provide and how in-house teams manage and mitigate labor and employment law risk. In developing our inaugural survey, in-house counsel told us they would value the opportunity to learn from their peers and compare and contrast their approach to handling labor and employment law matters against that of others. This discovery formed the cornerstone of our 2017 research which was developed in partnership with our Advisory Committee, comprised of leading in-house counsel, and Acritas, an esteemed professional services market research firm.

Over

Respondents in 2017 Three times the size of our inaugural survey

There were 303 respondents in 2017 – three times the size of our inaugural survey, with wider geographic coverage and a comparable spread across industry sectors. We used a combination of web survey and structured telephone interviews to capture the views of respondents. Respondents were predominantly senior legal counsel and labor and employment specialists. The research was completed in eight weeks, from January to March 2017.


Respondent Profile To ensure that the research provided a robust and accurate view of the labor and employment market, it was critical that we captured the views of a representative sample of in-house legal decision makers and labor and employment specialists.

Greater Than

HEADCOUNT

In Revenue

Over 1,000 Employees

% Technology, Media and Telecoms (TMT)

Financial Services

Health Care

Manufacturing

Almost half of the survey respondents work for businesses with annual revenues of $1 billion or more, and half work for businesses with at least 1,000 employees. Respondents are decision makers and influencers in labor and employment matters, including 64% who are in Chief Legal or Associate/Deputy General Counsel roles. They are geographically diverse, spread across 38 states, and represent a broad cross section of industries, with the greatest representation in Technology, Media and Telecoms (“TMT”), Finance, Health Care and Manufacturing.

53% 34% 64% 21% are L&E Decision Makers

Influence the Decision in L&E Matters


are in Senior Legal Roles

are in Roles which Specialize in L&E

Key Challenges Affecting In-House Counsel Today One of the key objectives of the survey was to serve as a benchmarking tool for in-house counsel and to share best practices for managing the labor and employment challenges facing businesses today.1 In order to understand those challenges in more depth, we asked respondents what they would ask their peers about how they manage labor and employment matters if they had the opportunity to pick the brain of their counterparts at similar businesses. The responses fell into five categories, which frame the results of our research:

1 Maximizing the In-House Legal Department Page 6

5

2 Working in Partnership with the Board Page 34

3

4 Managing Risk to the Business Page 32

1

Cost Management & Optimizing the Use of External Counsel Page 14

Working in Partnership with the HR Function and Business Units Page 28

Benchmarking Note: The average respondent in this data set has revenue of $750 million and 1,500 employees. We recognize that averages often are useful only to organizations that fit the average profile. Accordingly, where possible, we have provided a breakdown of benchmarking figures by organization size, scale and industry.


SECTION 1

Maximizing the In-House Legal Department In-house legal departments are under constant pressure to be increasingly effective and efficient, to deliver more with less and to reduce risk to the business. These pressures are magnified in labor and employment law where the regulatory landscape is changing and resources are often more limited.

RESPONDENTS WANT TO KNOW

“How are they structured or organized to handle labor and employment?” “Whether they have somebody internal who is dedicated only to labor and employment in legal.”

When we asked respondents what they sought to learn from their peers, 21% wanted to know how they could manage their legal department more effectively and efficiently. Their challenges encompassed two key themes:

How best to recruit, structure and develop their team


How to manage costs better – which may be achieved by improved management of claims and litigation

Benchmarking the Structure and Size of the In-house Team Looking at the size and structure of in-house labor and employment teams, we found the average respondent’s legal team is comprised of 20 lawyers, three of whom are involved in labor and employment work and one who is solely dedicated to labor and employment.

2 20

3

1

Lawyers Who Handle L&E Work

In-House Lawyers

Lawyer Dedicated Solely to L&E

Perhaps not surprisingly, the average size of the respondent’s legal team increases in direct relation to revenue and size of employee population. The largest businesses have the highest number of in-house lawyers. Looking at in-house resources that are dedicated to labor and employment work, we found that not until businesses reach 2,000 employees is there one full-time equivalent (FTE) lawyer dedicated to labor and employment on average, and not until their size reaches 5,000 employees does the average number of FTEs dedicated to labor and employment increase to two.