LAPD Employee Litigation Audit Inspector General's Office 2013
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INTRADEPARTMENTAL CORRESPONDENCE June 27, 2013 1.0 BPC #13-0235 TO: The Honorable Board of Police Commissioners FROM: Inspector General, Police Commission SUBJECT: EMPLOYMENT LITIGATION AUDIT RECOMMENDED ACTION REVIEW and APPROVE the Office of the Inspector General’s Employment Litigation Audit. DISCUSSION As part of its focus on issues of risk management, the Office of the Inspector General (OIG) conducted an audit of the Department’s responsibilities with regard to employment-related litigation. This is an area of concern because from 2006 to 2012, Department employmentrelated litigation cost the City approximately $31 million. To evaluate Department actions, the audit examined 27 lawsuits which were settled or adjudicated between 2007 and 2012. As a result of the audit, the OIG developed seven recommendations intended to reduce the number of lawsuits, to better track those lawsuits that do arise, and to better learn from closed lawsuits. These actions collectively should improve the Department’s ability to reduce employment litigation risks and costs. I am available to provide any information the Board may require. E-Copy – Original Signature on File with the Police Commission ALEXANDER A. BUSTAMANTE Inspector General Police Commission Attachment c: Executive Director Richard M. Tefank Chief of Police Charles L. Beck Special Assistant for Constitutional Policing Gerald L. Chaleff Department Risk Manager Beth D. Corriea Captain Roseira C. Moreno, Commanding Officer of Legal Affairs Division LOS ANGELES POLICE COMMISSION EMPLOYMENT LITIGATION AUDIT Conducted by the Conducted by the OFFICE OF THE INSPECTOR GENERAL ALEXANDER A. BUSTAMANTE Inspector General June 27, 2013 EMPLOYMENT T LITIGAT TION AUDIIT PURPOS SE The Emp ployment Littigation Aud dit (Audit) was w conductedd to review L LAPD’s respponsibilitiess with regard to o employmen nt-related litiigation and evaluate e the Departmentt’s compliannce with applicablle policies, electronic e daatabase track king systems,, costs assocciated with ddefending lawsuits, post-lawsuiit analysis, trraining, and prevention ppractices. GROUND BACKG Between July 1, 2006 6, and June 30, 3 2012, thee City of Los Angeles paaid approxim mately $110,000 0,000 for law wsuits involv ving Departm ment employyees. As the chart below w demonstrattes, the Depaartment’s acttions that ressulted in thatt liability falll into one off four categoories: 1) police professio onal liability (e.g., claimss of excessiv ve use of forrce, such as iin an officer involved shooting)), 2) automo obile liability y (e.g., trafficc collisions) , 3) employm ment practicces liability ((e.g., 1 discrimin nation, harasssment, and retaliation), r and 4) generral liability. Total Awards A FY Y2006/07 7 Ͳ 2011/12 $44,000,0 000 $31,0 000,000 $11 0,000,000 $31 1,000,000 $44,000,000 Police Professional Liability Auto Liabillity Employm ment Practicces Liability Gen eral Liabbility Total A successsful risk management sy ystem should d address eacch of these ffour categoriies in an effoort to reduce th he Department’s overall liability. Fo or the purposses of auditinng, howeverr, the OIG focused on o a single category, c em mployment-reelated litigatiion, and expplored the Deepartment’s practices in evaluatin ng existing employment e lawsuits as w well as deveeloping protoocols in preventin ng future onees. On Januaary 10, 2007, the Mayor published Executive E Diirective No. 99, titled “Littigation Riskk Managem ment,” which h set forth hiis requiremeents for manaaging all Citty-related litiigation. In tthe executivee directive, the t Mayor ex xpects each City C departm ment to impllement speciific steps to minimizee litigation costs. “Every y Departmen nt Head has a responsibiility to proviide leadershiip in litigation n risk management to con ntinue to red duce City payyouts and too reduce the nnumber of claims filled. This responsibility includes asssigning, trainning, and suppervising higgh-level 1 For the pu urposes of the Audit, the OIG G did not consiider workers’ ccompensation aas a liability. W Workers’ compensattion law is regu ulated under the California Laabor Code andd is a form of innsurance. Employment Litigation Audit Page 2 of 10 managers to engage directly on these tasks. Department Heads will be held accountable for the performance of these tasks and for progress in reducing the City's litigation risk and expense.” The OIG consulted Executive Directive No. 9 for guidance in structuring this audit. The OIG first examined the Department’s compliance with the tasks identified in the Mayor’s directive. To perform this analysis, the OIG reviewed, among other things, the costs associated with employment-related litigation, the manner of tracking specific lawsuits, and the training or other actions that the Department implemented as a result of employee-related litigation. METHODOLOGY The Audit selected lawsuits that were completed and closed from January 1, 2007, to June 30, 2012, as its population. The five and one-half year period was chosen to provide a broad spectrum of lawsuits. During that period, 99 employment-related lawsuits were closed.2 The Audit judgmentally selected 27 of these lawsuits to review.3 Each case was selected based on either a high initial demand amount by the plaintiff or a large payout by the City. Due to the selection methodology, the audit results are not meant to be representative of the entire population of closed employment-related lawsuits and focus instead on those cases that pose the highest risk of exposure for the City. The OIG conducted the Audit in accordance with generally accepted government auditing standards. These standards require that the Audit is adequately planned, performed, and supervised, and that sufficient, competent, relevant evidence is examined to provide a reasonable basis for the results and conclusion. OBJECTIVES Objective 1: Determine if the Department has complied with Mayor’s Executive Directive No. 9. The OIG evaluated the Department’s practices in reviewing employment litigation and other claims for compliance with the Mayor’s Executive Directive No. 9 (“Executive Directive”). The Executive Directive sets forth a series of protocols that the Department must develop to evaluate and review litigation and claims. The OIG designed the following tests to measure the Department’s compliance with this Directive: 2 3 The Audit relied on the City Attorney-maintained database to identify those lawsuits closed in the scope period. The Audit did not reinvestigate cases, but rather, reviewed those documents supplied by the Department and/or City Attorney’s Office. Employment Litigation Audit Page 3 of 10 1) Determine if the Department received notice, and a copy, of any claim or lawsuit, within 10 days of the City’s receipt or acceptance of the claim/lawsuit service; 2) Determine if the Department discussed and determined with the City Attorney whether early mediation or other settlement would be appropriate within 90 days of the City’s receipt of claim or lawsuit; 3) Determine if the Department discussed and determined with the City Attorney whether a statutory offer of settlement should be recommended to the charter-designated decisionmaking body at least six months before any scheduled trial date; 4) Determine if the Department discussed with the City Attorney whether an appeal should be filed within two weeks before any deadline to file an appeal; 5) Determine if the Department thoroughly investigated the facts underlying any claim or lawsuit within 90 days of the notice of the claim or lawsuit; and, 6) Determine if the Department evaluated whether the allegations in the claim/lawsuit and the facts suggest a policy or practice change, the need for new or renewed training, discipline, or reassignment within 105 days of the Department’s notice of the claim or lawsuit and within 30 days following the conclusion of the lawsuit through settlement or judgment. The City Attorney’s Office is responsible for all employment-related litigation and currently has approximately 20 attorneys and staff assigned to litigating these issues. The Department has approximately 19 employees from its Legal Affairs Division assigned to the City Attorney’s Office to assist with this litigation. These two sets of employees regularly interact on employment litigation issues. The OIG therefore attempted to audit the Department’s case files to determine, among other things, whether notations of these communications and any resulting work were captured in the case file. The OIG selected 27 of the 99 closed lawsuits for its Audit sample. The Department informed the OIG that these files were not available for review.4 According to the Legal Affairs Division, the investigating officer is responsible for maintaining and updating these files until the case is closed, when these files are dismantled and/or destroyed.5 Because these historical files were unavailable, the OIG requested two active lawsuit files to perform the testing. These two active files, however, did not contain any of the information necessary for the OIG to perform the required tests. Legal Affairs Division confirmed that the review of additional open cases would yield similar results. Based on the lack of available evidence, the Audit was unable to determine the Department’s compliance with the requirements tested. Objective 2: Determine if Department’s Claim/Lawsuit Information System is accurate. The Department’s Legal Affairs Division has an electronic database, the Claim/Lawsuit Information System (CLIS), that is used for tracking claims and lawsuits. This database was specifically designed to collect necessary information related to claims and lawsuit so that the 4 Legal Affairs Division files are referred to as Case Book Files. The Division provides written guidelines on the structure and content of the files. 5 Conclusion of a lawsuit occurs at dismissal, settlement, or verdict without regard to appeal. Employment Litigation Audit Page 4 of 10 Department’s management would have the necessary information to make informed litigation and risk management decisions. The Audit’s second objective was to determine whether CLIS included complete and accurate information. CLIS contains 49 separate data fields that capture a variety of information, including general descriptions of a specific case, the involved parties in a claim/lawsuit, trial status, status of related complaint investigations, and the financial outcome of a claim/lawsuit. The OIG attempted to audit 30 of these data fields for accuracy and completeness against source documents found in Legal Affairs Division’s case files. Because these historical files do not exist, the OIG was unable to evaluate the accuracy and completeness of these data fields. Although the Audit could not test the Department’s database for accuracy, the Audit did test the 30 data fields for completeness. The OIG attempted to gauge the completeness of the Department’s data fields by comparing them to the City Attorney’s Office’s litigation database. The City Attorney’s Office maintains a litigation database similar to that of Legal Affairs Division and both systems share similar data fields. The OIG reviewed the database entries for specific cases and learned that the two databases often contained inconsistent information. For example, in several cases, the databases for Department and the City Attorney’s Office had different entries for the claim/litigation status, key dates, and payout amounts for the same cases. In other cases, the Department’s data fields were empty, while the City Attorney’s database had an entry. The results revealed that the 30 CLIS data fields tested had a completion rate ranging from 0% to 100%. Approximately half of the fields yielded completion rates of 90-100%, while about a third had completion rates of less than 50%. Included in the latter group were fields designed to collect substantive data such as area of occurrence, verdict status, and which party the verdict was for. 6 Objective 3: Determine costs for employment-related lawsuits, regardless of their outcome. The Audit set out to determine the cost for each lawsuit in its sample. These costs are generally broken into two distinct categories. The first category of costs involves cases where the City settles a particular lawsuit or a jury awards the plaintiff damages. This is generally a concrete figure. The second category involves the costs to the City that are inherent in defending a case, regardless of outcome. The most recognizable costs to the City are the salaries of those individuals involved in defending the lawsuits. The City Controller’s Office has determined that the internal costs to the City can be calculated by determining the salaries for the individuals involved in defending the lawsuits and then adding the employee benefits (e.g., medical insurance and life insurance) and overhead costs (e.g., building and utility expense, shared City Administration & Support, and Central expenses). 6 See Exhibit A. Employment Litigation Audit Page 5 of 10 With the City Controller’s information related to internal costs, the OIG was able to calculate the annual internal costs for the City Attorney and Department’s litigation staff for all employmentrelated litigation from 2006 to 2012.7 Based on the available information, the City’s internal costs to defend employment-related lawsuits for Fiscal Year 2011/12 were $7.8 million. The cost breakdown revealed expenses of $4.2 million for the Department and $3.6 million for the City Attorney’s Office. The total internal costs for the following six-year period were about $42 million. Employment Litigation Liability Fiscal Year FY2006/07 FY2007/08 FY2008/09 FY2009/10 FY2010/11 FY2011/12 Total Lawsuits Closed8 12 17 18 15 19 18 99 Awards or Settlement Paid by City $ 2,611,127 $ 1,318,463 $ 3,652,622 $ 4,992,655 $ 8,358,144 $10,445,146 $ 31,378,157 Litigation Costs $ 6,803,374 $ 7,179,249 $ 7,331,331 $ 7,164,643 $ 6,442,758 $7,764,903 $ 42,686,258 When the OIG attempted to determine the litigation costs for each lawsuit, it learned that neither the Department nor the City Attorney’s Office track the number of hours an individual worked on a particular case. Although the OIG can calculate the amount the City paid in a particular case to satisfy a jury award or settlement, without knowing the number of individuals working on a particular case or the hours devoted to that case, the OIG is unable to calculate the litigation costs for any of the cases within its sample and therefore is unable to determine the total costs to the City related to a specific case.9 Overall, the 27 cases included in the OIG’s Audit sample resulted in a total of nearly $25.5 million in payouts, 81 percent of the total employment-related litigation payouts during that period. The OIG first analyzed lawsuits that the City Attorney’s Office settled. Of the 27 cases in the Audit sample, 11 (41%) were settled in lieu of trial. The length of time it took to reach a settlement for these cases varied widely but averaged 2.2 years. Settlement agreement awards averaged $500,000, but ranged from $75,000 to $2,250,000. The following table details the nature of the lawsuits and costs associated with the settlement of the cases. 7 Salaries and staffing were adjusted annually to reflect accurate expenses for each fiscal year in the Audit sample. 8 The closed case data was furnished by Legal Affairs Division. 9 The amount of annual expense to defend employment lawsuits is not an estimate. Regardless of how costs are allocated for individual cases, the City’s defense costs for fiscal year 2011/12 were close to 8 million dollars. For the 6 years encompassed by the Audit, those costs totaled over 42 million dollars. Employment Litigation Audit Page 6 of 10 Lawsuits Settled in Lieu of Trial Case No. Days Litigation Category Settlement Costs BC34646 CV11-0039 BC433073 BC340767 BC326467 BC457299 BC426816 BC435392 BC392939 BC346672 BC383678 Totals Averages 1,246 262 646 487 1,374 1,680 810 347 1,293 313 294 8,752 796 Sexual Harassment Retaliation Employment Gender Discrimination Medical Discrimination Retaliation Race Discrimination Sexual Harassment Retaliation Medical Discrimination Medical Discrimination $2,250,000 $750,000 $650,000 $600,000 $290,000 $285,000 $275,000 $175,000 $90,000 $75,000 $75,000 $5,515,000 $501,364 The OIG then analyzed lawsuits where there were verdicts. In the Audit sample, 13 lawsuits received a trial verdict. In this group, the plaintiffs received verdicts in their favor in 10 of these 13 lawsuits. The length of time it took to conclude these cases averaged three years. Plaintiff awards ranged from $85,000 to $4.3 million and averaged about $2 million dollars. The chart below details the nature of the lawsuits and costs associated with trial of each case. Lawsuits with Favorable Outcome for Plaintiff Case No. Days Litigation Category Jury Awards 11-44137 BC3650 BC361139 BC383784 918 1,246 896 1,302 Retaliation Retaliation Retaliation Medical Discrimination $4,314,765 $4,014,846 $3,602,000 $3,159,596 BC406133 370 Sexual Harassment $2,701,327 BC365114 BC341480 S167682 1,625 1,341 1,370 Retaliation Race Discrimination Sexual Harassment $825,000 $635,798 $344,489 BC398970 610 Gender Discrimination $281,850 BC394475 Totals Averages 1,346 11,024 1,102 Gender Discrimination $85,000 $19,964,670 $1,996,467 Employment Litigation Audit Page 7 of 10 The OIG lastly analyzed lawsuits where the City Attorney’s Office was successful. Six lawsuits in the Audit sample had favorable outcomes for the City. As previously discussed, the Audit sample was not selected at random and is not intended to reflect an accurate proportion of the 99 lawsuits with favorable outcomes for plaintiffs verses favorable outcomes for the City.10 As noted above, three cases resulted in a verdict for the City. Although one of these was lost at first appeal, the City prevailed in an appeal of its own that accounted for the final favorable outcome. The remaining three favorable outcomes for the City were as a result of dismissal by the trial judge. The length of time it took to conclude these cases averaged 2.3 years. Although the City did not pay any awards for these lawsuits, it did incur external and internal defense costs. As previously indicated, the OIG was unable to calculate these costs without additional information from the Department and the City Attorney’s Office. The chart below details the nature of the lawsuits and costs associated with each case. Lawsuit with Favorable Outcome for City Case No. Days Litigation Category Award B226685 1,806 Sexual Orientation $0 CV09-5536 1,127 Sexual Harassment $0 B218932 BC460149 BC413590 889 377 356 Race Discrimination Sexual Harassment Race Discrimination $0 $0 $0 BC385444 456 Retaliation $0 Totals Averages 5,011 835 $0 $0 Objective 4: Determine if the Department initiated a complaint, as required, for each employee-related lawsuit. The Department requires that a personnel complaint is filed any time misconduct is alleged against an employee. This policy extends to the workplace when one employee alleges misconduct against another. Therefore, every employment lawsuit requires that a personnel complaint be filed and, as a matter of course, thoroughly investigated. To help ensure that this requirement is met, a copy of each employment lawsuit is forwarded to Internal Affairs Group (IAG). In turn, IAG is responsible for initiating a complaint, if a complaint is not already on file. The Audit tested to determine if this requirement was met. The results of the test revealed that all but one lawsuit had a corresponding complaint, for a compliance rate of 96 percent. 10 The Audit sample was selected judgmentally based on the highest amount of award and the highest initial demand. Employment Litigation Audit Page 8 of 10 In the OIG’s sample of employment-related lawsuits, the most common allegation of misconduct was retaliation. Retaliation is defined by the Department as an adverse employment action11 taken against an employee for engaging in protected activity.12 Objective 5: Compare the results of each lawsuit to the results of the related complaint investigation(s). The OIG examined both employment-related complaints and lawsuits to determine whether the Department examines the specific facts and circumstances surrounding each case to determine what specific training it can provide its management on employment-related matters to improve its operations and minimize the likelihood that similar complaints or lawsuits would occur in the future. The OIG reviewed 26 personnel complaint investigations and their related employment lawsuits. During this review, the OIG determined that 20 of the 26 the lawsuits resulted in settlements for the plaintiff or verdicts against the City. The OIG evaluated each of these complaints and lawsuits to determine what actions the Department undertook to minimize the reoccurrence of similar lawsuits in the future. Although the Department regularly provides managers with training on broad employmentrelated issues, the OIG did not find evidence that the Department provides training to its managers on lessons learned from these cases or specific guidance on how to handle particular employment-related issues. Furthermore, the Department does not have a system to identify and analyze the at-risk behavior responsible for the adverse outcomes of these cases and then compare these findings with current Department policies and practices. 11 An adverse employment action includes an action that would cause a reasonable employee to be deterred from engaging in a protected activity or an action in direct response to an employee engaging in a protected activity. 12 Protected activities include opposing, reporting, or participating in any claim, lawsuit, or investigation concerning unlawful discrimination or sexual harassment, filing a grievance or participation in any unfair labor complaint, taking advantage of any labor right or benefit, reporting misconduct of another Department employee and supporting, assisting, or cooperating in a misconduct investigation. Employment Litigation Audit Page 9 of 10 RECOMMENDATIONS Below is a summary of the OIG’s recommendations. The Department generally agrees with each recommendation. 1. The OIG recommends that the Department review Executive Directive No. 9 for all sections applicable to LAPD and implement policies and procedures designed to bring the Department into compliance with the Mayor’s directive. 2. The OIG recommends that the Department implement the Employee Mediation Program to reduce the number of employee-related lawsuits proceeding to settlement or trial. The program, developed by the OIG in consultation with the Department, the City Attorney’s Office and the Los Angeles Police Protective League, will provide a mechanism for the development of internal remedies for employee grievances, where appropriate. 3. The OIG recommends that the Department and the City Attorney’s Office conduct formal case reviews whenever a case has a scheduled settlement conference or trial approaching. In order to quickly identify those cases suitable for settlement, the formal review should require the parties to discuss the facts of the case, all claims and defenses, the City’s potential financial exposure and the attorney’s valuation of the case for settlement. 4. The OIG recommends that the Department create a document retention plan specifically for the litigation files and related notes for each employment-related case. 5. The OIG recommends that the Department implement a system to ensure that the significant information for each lawsuit is timely and accurately entered into the appropriate fields within the Claim/Lawsuit Information System or a comparable database. 6. The OIG recommends that the Department evaluate all employment-related complaints, regardless of outcome, to identify possible areas for improvement and then provide managers the targeted training necessary to implement those improvements. 7. The OIG recommends that the Department review with the City Attorney’s Office the facts and circumstances for each lawsuit where there is a settlement or verdict adverse to the City to determine the specific issues that created the liability or litigation risk. Furthermore, the OIG recommends that training is developed to address the “lessons learned” in each case and that such training is disseminated to Department staff members in a relevant manner with a goal of preventing similar future behavior. Employment Litigation Audit Page 10 of 10 EXHIBIT A Data Completion Rates of 30 CLIS Data Fields Tested (sorted from lowest to highest completion rate) Data Field 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Incident Time Date Claim Concluded Final Cause of Action Incident Date Claim No. Date Claim Filed Location of Occurrence Area of Occurrence Verdict Status Verdict for: Trial Date Appeal Supervisor Review Complaint No. Date Lawsuit Concluded Payouts Completed LAD Investigator City Attorney Case Status Date IAG Response Date of Report Claim/Case Name Type of Case Jurisdiction Court Case No. Date Lawsuit Filed Plaintiff Attorney Initial Cause of Action Involved Persons Listed Complaint to IAG % Complete 0 7 15 19 26 30 33 37 37 41 44 60 63 70 74 85 93 93 96 96 100 100 100 100 100 100 100 100 100 100