One result of the Great Recession was a terrifying decline in 401(k) values that hit people who were too heavily invested in their employer's stock especially hard. Many of those employees and former employees have sued, saying their employers were wrong in requiring or even encouraging workers to invest in company equities.
Attorney Gerald L. Maatman, Jr. , partner in employment specialist Seyfarth Shaw's class-action defense group and the author of a respected report on class-action employment lawsuits, says the uncertain economic climate continues to spur an increasing number of lawsuits seeking recovery of 401(k) losses. As these suits grow in size and complexity, they are driving a trend toward substantially higher settlement figures, Maatman says.
But before you rush out to salvage your retirement by engaging an attorney and suing over your shrunken 401(k), Maatman also says that the bar in these kinds of cases has been raised by the courts, making it increasingly difficult to turn these kinds of legal actions into class-action lawsuits. Maatman explains that the problem is identifying the damage from the losses. As two employees of a company, you and I might have both lost $50,000, but the damage to our retirement planning from our losses would be different if $50,000 was all I had saved, while you had saved $1 million.
Maatman says the courts are looking at these differing impacts and saying they don't add up to a class-action suit. While both of us might be able to sue and win, we can't band together with other participants in the company's 401(k) plan and sue as a group. For some companies, he says, that decision is just increasing the number of lawsuits it has to deal with, but from a small-fry-employee perspective, these kinds of decisions can be discouraging. Suing as an individual is much more difficult -- and potentially expensive -- than just joining in a class-action lawsuit and hoping for the best.