Employment lawsuits can be financially and emotionally exhausting. A defendant facing an action brought by an employee—whether for employment discrimination, wrongful termination, wage disputes, retaliation, or other violations—must prepare for expensive litigation. These cases often involve attorneys’ fees, costs incurred, and extended trial court proceedings, making it essential to adopt legal strategies that effectively reduce risk. One such strategy is the offer of judgment under Federal Rule 68, a legal tool that allows the defendant to issue a written offer to settle a lawsuit under specified terms before trial.

If the plaintiff declines and fails to secure a more favorable outcome in court, they may be required to pay certain costs incurred after the offer date, but this generally does not include attorney’s fees unless the underlying statute defines them as recoverable costs. This mechanism serves as a strategic incentive to encourage timely and fair settlement, deter unnecessary litigation, and protect the defendant from excessive legal expenses.

The offer of judgment is a valuable legal tool that may apply to a wide range of employment claims brought before federal court and can influence how a district court or circuit court handles attorneys’ fees, witness fees, and other costs. 

Understanding how to strategically use this legal provision can make a significant difference in the outcome of a case. To see how it benefits defendants, let’s break down its advantages and legal framework.

The Legal Framework Behind the Offer of Judgment

The offer of judgment is a critical aspect of civil procedure governed by Federal Rule 68. This rule allows a defendant to make a settlement offer, which the plaintiff must either accept or reject within a certain notice period.

Key aspects of the Federal Rule include:

• The defendant issues a written offer of judgment at least 14 days before trial, specifying settlement terms.

• The plaintiff has 14 days to accept the offer. If accepted, the court files the settlement offer, and the case ends.

• If the plaintiff declines and the final judgment is less favorable, the plaintiff may be required to pay certain post-offer costs incurred.

• An unaccepted offer is considered withdrawn and cannot be used as evidence in court.

• The trial court determines which post-offer costs, if any, the plaintiff must cover, considering relevant statutes and case law.

• This rule applies to lawsuits in federal court, including claims under employment discrimination statutes and the Civil Rights Act.

How the Offer of Judgment Helps Defendants

The offer of judgment serves as a powerful tool for defendants in employment lawsuits, allowing them to manage legal risks effectively and avoid unnecessary expenses. By strategically using this rule, defendants can gain several advantages when facing claims related to employment discrimination, wage disputes, wrongful termination, and other workplace-related legal actions.

Key Benefits of an Offer of Judgment

• Avoid Lengthy Litigation: Trials in federal court or circuit court can take years, leading to mounting costs incurred for both parties. The defendant may need to cover attorneys’ fees, witness fees, and court expenses while waiting for a trial court decision. A settlement offer can push for a quicker resolution. 

• Control Litigation Expenses: Even if the defendant wins, they might still have to cover substantial reasonable attorneys’ fees and other costs unless a settlement is reached. 

• Incentivizes Settlement: If the plaintiff declines the written offer and later fails to secure a better outcome, they may be required to pay certain post-offer costs, reducing the financial risk for the defendant. 

• Mitigate Risk: The party defending the lawsuit can use an offer of judgment strategically when they believe they have a strong case. 

• Prevent Escalating Damages: Early settlement can minimize financial liability under the underlying statute governing the lawsuit. 

• This is particularly important in cases involving statutory damages, such as those under employment discrimination laws or wage-and-hour disputes, where prolonged litigation could lead to increased penalties and fees.

Using an offer of judgment wisely can protect employers from excessive legal exposure, streamline dispute resolution, and ensure that costs remain manageable. 

Pros & Cons of an Offer of Judgment for Plaintiffs and Defendants

A defendant makes an offer of judgment to avoid expensive litigation and substantially reduce attorneys’ fees and other costs incurred. However, both parties must consider the advantages and risks before deciding to accept or reject the settlement offer.

Benefits for Defendants:

• Encourage settlement before a trial begins.

• Limits litigation expenses if the plaintiff declines and later fails to secure a favorable judgment.

• Can help manage financial risk under certain employment claims.

• Provides leverage in settlement negotiations. 

Risks for Defendants:

• If the plaintiff ultimately obtains a more favorable ruling, the defendant may remain liable for their attorneys’ fees depending on the statute governing the claim. 

• The court has discretion over whether certain post-offer costs will be imposed.  

• Certain civil rights and employment statutes may limit the effectiveness of Rule 68. 

Pros for Plaintiffs:

• Provides an opportunity to secure a settlement and avoid uncertainty at trial.

• Ensures guaranteed compensation under specified terms.

Cons for Plaintiffs:

• May result in a lower settlement than what could be awarded at trial.

• Waives the right to pursue further legal action under the underlying statute.

• Accepting too early might prevent uncovering stronger evidence that could increase the claim’s value.

Consequences of Rejecting an Offer of Judgment

A plaintiff who refuses a written offer under Federal Rule 68 must carefully evaluate the financial risks. If the plaintiff declines and later fails to obtain a more favorable judgment, the trial court may require them to pay certain costs incurred by the defendant after the rejected offer.

 These costs may include:

• Witness fees, court filing fees, and other litigation expenses incurred by the opposing party.

• Potential cost penalties imposed by the court based on the specific case and governing statute.

If the case proceeds to federal court, the district court or circuit court can enforce these financial penalties within the scope of applicable laws. 

Impact of Rule 68 in Sexual Harassment and Employment Discrimination Cases

Consider an employee suing for employment discrimination or sexual harassment under Title VII. The employer, confident in its defense, offers a settlement under Rule 68. The plaintiff declines and proceeds to trial, winning a lower award than the offer. As a result, the plaintiff may be required to cover certain costs incurred by the defendant, but not the attorneys’ fees unless explicitly permitted by law. 

Real-world examples show that Rule 68 can:

• Prevent unnecessary trials.

• Reduce attorneys’ fees and witness fees. (where applicable).

• Provide a safeguard for employers against excessive claims.

• Allow companies to focus on business rather than prolonged litigation.

• Limit the prevailing party’s ability to recover full reasonable attorneys’ fees if they fail to exceed the settlement offer.

This strategy protects businesses while ensuring fair compensation when justified.

Key Considerations for Employers Using an Offer of Judgment

Employers should carefully evaluate the following before utilizing Rule 68:

• Timing Matters: Making an offer of judgment too early may be ineffective, while a late offer may not save substantial legal expenses.

• Offer Calculation: Ensure the settlement offer reflects the risks and potential judgment amount.

• Legal Advice: Work with skilled attorneys to craft a compelling and strategic offer.

• Employee’s Perspective: Consider whether the plaintiff might view the offer as fair or be motivated to pursue further action.

• Statutory Limitations: Some employment claims have unique rules on reasonable attorneys’ fees, requiring careful planning before an offer of judgment is made.

Employers must balance these factors to make Rule 68 a useful tool under the civil procedure rules, discussing your case with a skilled employment attorney will help you make a well-informed decision.

The Role of Bourassa Law Group

Employment lawsuits are complex, and the offer of judgment can be a game-changer. It helps substantially reduce legal expenses, encourage settlement, and provide a financial advantage in federal court cases. By using this legal tool, defendants can minimize risk and avoid prolonged litigation.

If your company is facing an employment lawsuit, consult with Bourassa Law Group for expert guidance.

Contact us today for a free consultation and safeguard your company.

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