Conducting a consumer-facing business biggest indicator of class action risk

In its Class Action Risk 2020 report, Allens has identified having a consumer-facing business as the biggest indicator of class action risk.

According to the report, more than 40% of the class actions filed in 2019 were filed on behalf of consumers. This result is a change from recent years in which being an ASX-listed company was the biggest indicator of risk.

'We have seen numerous claims arising from issues exposed during the Financial Services Royal Commission. We expect class actions inspired by Royal Commissions or other regulatory actions to be a long term trend,' said Jenny Campbell, Partner.

'An increase in employment claims has also been reported – now accounting for almost 15% of claims. Issues such as whether workers are employees and entitled to the benefits of an employment relationship and claims about working conditions, underpayment of wages and illness/injury sustained at work.

The report identifies emerging areas of risk including:

• class actions arising out of data breaches based on allegations of negligence, breach of contract and/or misleading or deceptive statements.
• climate change with claims based around a failure to disclose the potential impact of material business risks including risks associated with not lowering carbon emissions and/or the costs associated with making the transition to lower emissions.
• corporate governance where claims based on alleged inadequacy in a company's corporate governance processes and/or failure in internal systems.

'The drivers of class action risk are changing. While shareholder class actions remain a significant risk for listed companies, many class action promoters are seeing greener pastures in piggy-backing off Royal Commission or regulatory activity to target consumer facing businesses ' said Jenny.

Ends