The use of an economist in labor and employment disputes: legal and practical considerations.

• Author: Garrity, James

Do you represent employers? Employees? If so, how often do you evaluate the need for an economic expert? Lawyers who understand and routinely assess the need for an economist's expertise--whether on behalf of plaintiffs or defendants--may attain significantly better outcomes in settlement or at trial. Lawyers who defend employers may also benefit from an economist's insights for the purpose of avoiding claims altogether.

Labor and employment litigation, which for purposes of this article is defined liberally to include all administrative and judicial proceedings concerning claims of unfair or illegal workplace behavior(1) often have two attributes--mounds of statistical data and complex economic loss claims--that make economists a legitimate "must-have" resource in many situations. In some instances it may be impossible to correctly appraise a client's position without economic analysis. Yet the benefit from economic expertise may not always be obvious because the roles and methodologies of economists are not always easily defined.

This article identifies some of the uses for economists in labor and employment disputes. It is not all-inclusive. Nonetheless, it does illustrate the role of economics in all stages of this area of practice--before, during and after the life of a claim.

A Litigator's Swiss Army Knife

Litigation is generally a win-lose event. It demands the active use of strategic and tactical planning. Experts, whether retained for behind-the-scenes consulting or for testimony, can provide a decisive advantage over an adversary. Dr. David B. Graeven, president of Trial Behavior Consulting, Inc., a national jury consulting firm with offices in Florida, says economists can have a huge impact on the outcome of a case. "Our firm has conducted post trial interviews with thousands of jurors. Results of these interviews have shown that economists can have a very significant impact on the outcome of the case."

In labor and employment disputes, economists function as a sort of lawyer's Swiss Army knife. Economists can be hired before litigation arises to evaluate an employer's hiring practices. They can be used in litigation for confidential, work-product privileged consulting, or for use as disclosed experts. The proof required for certain liability and damage issues in labor and employment cases is beyond the province of lay witnesses, including statistical evidence of disparities in employment actions (e.g., hiring, promotions, terminations, salary administration) and most calculations and testimony relating to lost past and future wages and benefits. The classic distinction between expert and lay witnesses is of course what they can say. In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 592 (1993), the U.S. Supreme Court said that "[un]like an ordinary witness ... an expert is permitted wide latitude to offer opinions, including those that are not based on firsthand knowledge or observation." An expert can testify about her or his opinion; a lay witness is generally limited to facts.(2)

After a dispute ends, an economist can analyze an employer's hiring and other practices from a statistical view and provide guidance on developing policies consistent with the outcome of the dispute. An economist can also serve as a monitor of future employment decisions (e.g., hiring, firing, and promotions) if active monitoring is part of the agreed or required relief.

Economists and Kumho/Daubert

A general understanding of the admissibility standards for expert testimony is useful in evaluating the role an economist may play in a dispute. In the last 10 years the U.S. Supreme Court issued three major decisions on this topic, and those decisions now provide the basic framework for a lawyer's analysis.

One reason the Court may have seen fit to address this area of the law may have been the marked increase, during the 1980s, in the number of consultants offering paid "expert" testimony on a range of topics that went far beyond traditional and, some said, provable subjects. Popular outcries rose to a crescendo in the early 1990s, to the point where books on abuses in expert testimony were even being aimed at the general public, most notably Galileo's Revenge: Junk Science In The Courtroom.(3) The term "junk science" referred to the flood of new scientific theories being asserted that were not based on sound, accepted scientific and medical principles. Although the controversy did not target economists, the changes affect virtually any expert a party may wish to call. The trilogy of decisions on this topic are Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), General Electric Co. v. Joiner, 522 U.S. 136 (1997), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).

In Daubert, the first of these cases, the Court held that it is the Federal Rules of Evidence, and not the long-accepted rule in Frye v. U.S., 293 F. 1013 (D.C. App. 1923), that governs the admissibility of expert scientific testimony in a federal trial. This created a new standard for the admissibility of expert testimony in federal court, and likely in many state courts as well.

The Frye decision, in general terms, stands "for the rule that expert opinion based on a scientific technique is inadmissible unless the technique is `generally accepted' as reliable in the relevant scientific community."(4) Using this "general acceptance" standard, the Frye Court of Appeals ruled that a mechanical test for deception, which is essentially a predecessor to the polygraph examination, "has not yet gained such standing and scientific recognition among physiological and psychological authorities as would justify the courts in admitting expert testimony deduced from the discovery, development, and experiments thus far made." Frye, 293 F. 1013, 1014. For the 70 years that followed the release of the 1923 decision, Frye served as the cornerstone of admissibility for expert testimony, sometimes even being mistakenly cited as a U.S. Supreme Court decision. (Interestingly, the eight-paragraph Frye decision is just 667 words in length and contains no citations to any authority whatsoever.)

In 1993, the U.S. Supreme Court in Daubert ruled that the 1975 adoption of the Federal Rules of Evidence superseded not only Frye's purported evidentiary standard but also "common law" evidentiary principles in general. See generally Daubert, 509 U.S. 579, 587-590. Finding that "[n]othing in the test of [Federal Rule of Evidence 702] establishes `general acceptance' as an absolute prerequisite to admissibility," 509 U.S. 579, 588, the Court held that the Federal Rules of Evidence are the proper focus of questions of admissibility regarding expert testimony. In particular, Federal Rule of Evidence 702 provides that "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of...