Surviving a Claim filed with the California Labor Commissioner for Wages
A practical approach to understanding the Procedure involved as an Employer
The Need to Know Guide for an Employer up to the "Notice of Hearing".1. You've received Notice that an Employee has filed a Claim for Wages, Penalties and/or interest against you.
2. Don't panic.
3. Identify the statutes that are identified in the notice; Google the statutes identified and make a determination as whether the notice makes sense.
4. Accept the fact that the claims and numbers in the notice have not been confirmed or thoroughly reviewed by the Labor Commissioner. At this point, the notice only contains the information that the employee has included and it may bear no resemblance to what, if anything, is actually owed.
5. If the notice identifies a wage claim that seems significant, with respect to the amount that may be owing, look for a lawyer. A good lawyer will help you identify the relevant violations, whether they may have merit, and how to change your policies to comply with state law to avoid future claims.
6. Get comfortable with the process; there will be a hearing in which the Labor Commissioner asks both the employee and the employer questions to determine if a settlement can be reached. This hearing may be in person and it may be by telephone. Don't get spooked by the section of the notice that says something like "if you pay the whole amount now by sending us a check this will be over....". Often the claims are overblown, cannot be supported and are simply made up. Again, Don't panic. The more information you have about the what the employee is claiming, the easier it will be to see if the claims make any sense. Don't assume that simply because big numbers showed up on a letter from the State of California, that it means you in fact owe that amount.
7. During the course of the hearing you will also be encouraged to "settle". If you have determined you may owe "something" but not what's included on the notice, make a safe offer: something you think the employee may take right now, but start low. if you're given time, and it sounds like the employee might accept the offer, if you negotiate upwards, then negotiate upwards. But, don't be conned and/or think you have to pay an enormous sum out to an employee who does not have proof or evidence that any wages have been wrongfully withheld. I have seen wage claims that are filed for 80k and settle at the first hearing for $1,500.00 and, I have seen claims filed for 80k which have reached a judgment of 80k. Take your time, figure out what the claim is and be patient. I very rarely advise my employers to settle at the hearing stage, unless the employee is incredibly reasonable and will take pennies on the dollar for their claim. The employer might be tempted to throw money at the employee, because they are terrified the problem will only get bigger. But, the Labor Commissioner is not the IRS and if the employer can be patient and/or has good counsel to navigate the process, then the employer is much more likely to get a favorable result in the long run. Read the second section, as to what happens after the hearing, to find out where the employer starts to gain some footing in the process.
What happens after the initial hearing if the claims are not resolved?1. The Labor Commissioner will establish a "conference" if the case does not resolve at the hearing.
2. The conference will be much like a mini-trial - and can be set out anywhere from between 6 weeks to 10 months after the initial hearing. The "conference" will be the first time that the Labor Commissioner actually evaluates the strength of the employee claims. Once the conference opens, the Labor Commissioner will tell the parties (the employer and the employee) that they do not represent either side. Don't believe it. The various Labor Commissioners I have met and worked with are serious advocates of the Labor Code - and if the employer has not kept good records and the employee is even slightly credible, the employer will get a judgment against them. As the employer, you should do your best to collect your time and wage records for the employee, bring copies of the records to the conference and identify for the Labor Commissioner why you believe your records show you've kept accurate records and don't owe any money to the employee. Many of the violations that the Labor Commissioner may be interested in are highly technical in nature - and so, although the Labor Commissioner always states that neither party requires a lawyer to move ahead, it can be really helpful to have a lawyer on your side who understands the process, the potential statutory violations and to see if, based on your records, the employee's claims have any merit.
3. After a conference, the Labor Commissioner will tell you that they will reach a decision and mail their decision to both you and the employee. Sometimes this takes a month and sometimes it takes considerably longer, depending upon how backed up the Labor Commissioner is with other complaints. In any event, keep your eyes on the mailbox. Once the Labor Commissioner mails the decision, you will have 10 days to appeal the decision.
4. If the decision/judgment by the Labor Commissioner is over 5k, then I always recommend to my employers to "appeal". If it's appealed, then finally, the winds start to blow in favor of the employer. An appeal will require that you post the 5k (or whatever the judgment amounts to, obviously this becomes a more serious task the higher the number) in the local civil court.
5. Once the bond is filed with the Court, then the matter moves forward to a "trial de novo" meaning the Labor Commissioner's judgment essentially vanishes and the case moves ahead in civil court as if no judgment has been reached and the matter will be tried as if it's just begun. It's at this point, that the employee generally gets tired and spooked by the process and makes a decision to settle for significantly less than the judgment.
6. The Labor Commissioner will suggest to every employee that they are ready to help in the event the employer files an appeal. Don't believe it! In my experience very few employees ever get representation from the Labor Commissioner after appeal.
7. Although you're now in the driver's seat, make sure you ask about atty's fees provision for a prevailing employee.
Patience will serve you well in this process. Hold tight and good luck!