How Section 998 Offers Are Reshaping Employment Litigation Strategy

A Powerful but Often Overlooked Tool in Discrimination Cases 

In employment litigation, strategy often extends far beyond the merits of the case itself. One of the most impactful—but frequently underutilized—tools available to both plaintiffs and defendants in California is the statutory offer to compromise under Code of Civil Procedure Section 998. 

A recent Daily Journal analysis you can find here, it highlights how plaintiffs’ attorneys are increasingly using these offers as a strategic mechanism to shift risk, influence settlement dynamics, and enhance potential recovery. 

Understanding how Section 998 works—and how it is being used in practice—is critical for anyone involved in employment disputes.  

What Is a Section 998 Offer? 

At its core, a Section 998 offer is a formal settlement proposal made before trial. If the opposing party rejects the offer and fails to obtain a more favorable result at trial, there can be significant financial consequences. 

These consequences may include: 

• Responsibility for the offering party’s post-offer costs  

• Limitations on recovering certain costs  

• In some cases, exposure to expert witness fees  

The statute is designed to encourage settlement by creating a financial incentive to carefully evaluate reasonable offers. 

How Plaintiffs Are Using 998 Offers Strategically 

As discussed in the Daily Journal article, plaintiffs’ attorneys in employment discrimination cases are increasingly using Section 998 offers not simply as settlement tools, but as leverage points.  

Rather than waiting until late-stage negotiations, some plaintiffs are: 

• Making early, well-calculated 998 offers  

• Using them to establish a benchmark for case value  

• Positioning the defense to take on additional risk if the offer is rejected  

This approach can fundamentally shift the dynamics of a case. 

If a defendant rejects a reasonable offer and the plaintiff later achieves a better result, the financial consequences can significantly increase the total exposure—sometimes beyond what would have been paid in early settlement. 

Why This Matters in Employment Disputes 

Employment cases—particularly discrimination and retaliation claims—often involve: 

• Emotional distress damages  

• Attorney’s fees  

• Fact-intensive disputes that are difficult to predict at trial  

This uncertainty makes Section 998 offers especially powerful. 

They force both sides to confront risk early. For defendants, rejecting a reasonable offer may lead to increased financial exposure. For plaintiffs, a properly timed offer can strengthen their position even before trial begins. 

The Importance of Timing and Precision 

Not all 998 offers are effective. The strategy depends heavily on timing, clarity, and reasonableness. 

An effective offer must: 

• Be clearly drafted and compliant with statutory requirements  

• Reflect a realistic assessment of the case value  

• Be made at a time when the opposing party can meaningfully evaluate it  

Poorly timed or unrealistic offers may carry little weight and fail to trigger the intended consequences. 

A Strategic Tool—But Not Without Risk 

While Section 998 can be a powerful tool, it must be used carefully. 

For plaintiffs, making an aggressive offer too early or without sufficient support may weaken credibility. For defendants, dismissing a well-structured offer without proper evaluation can lead to significant downstream exposure. 

As the Daily Journal analysis makes clear, these offers are no longer routine procedural steps—they are becoming central to litigation strategy in employment cases. 

Conclusion 

Section 998 offers are playing an increasingly important role in shaping employment litigation outcomes. When used effectively, they can influence settlement negotiations, shift financial risk, and ultimately impact the final resolution of a case. 

For both plaintiffs and defendants, understanding how and when to use these offers is essential. 

If you are involved in an employment dispute or have questions about litigation strategy, including settlement tools like Section 998, McGonigle Law is available to discuss your situation. 

📞 (800) 713-5260