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September 14, 2017

Resolving Small Wage Claims: The Benjamin Solution

By Terry O’Connor

It is the rare employer who has not had a terminated employee claim untimely payment of a last check, or failure to pay expenses. In response, most employers will insist that the employee got all of their pay and vow to fight the claim as legal extortion. However, when dealing with the California Labor Commissioner, the law and the enforcement personnel usually guarantee a bad result.

There is an alternative way of getting rid of such claims. A couple of cases demonstrate that a reliance on the fairness of our wage and hour laws, and confidence in the value of one’s own good faith, do not count for much when dealing with the Labor Commissioner’s office.

A true employer nightmare occurred in the case of Beck v. Stratton (2017). When an employee quit, the employer directed his payroll service to pay him the hours claimed, but the service underpaid the employee around $300. The employee filed a Labor Commissioner claim for $303.55 in unpaid wages.

Unable to resolve the claim at the conference, the matter went to trial before a hearing officer who awarded the employee $303.55 plus an additional $5,757.46 in liquidated damages, interest and statutory penalties for a total over $6,000.00! It gets worse.

Astounded, Employer Beck appealed the award to the Superior Court.

A Labor Commissioner attorney represented the employee before the court and promptly made additional claims for $61,000 for faulty pay stubs. (Under a 2007 Supreme Court case, an employee can raise new wage-related claims at the de novo trial in addition to his original claims.)

Beck had no better luck before the court which awarded the employee the same $6,000.00 plus $750 for the pay stubs and an additional $31,365 in attorney fees. (Representing himself, Beck did not have to pay his own attorney fees.)

A few years ago, an agricultural employee claimed she was owed $43.50 for a day’s work on October 18. The employer’s pay records and the cashed payroll check showed she had been paid $43.50 in that pay period. Despite the records, the company did not prevail at the Labor Commissioner hearing and decided to appeal to superior court. With the aid of counsel and review of all the crew time sheets, the employer learned just prior to the second trial that, due to a clerical error, the plaintiff had actually been underpaid $43.50 in a September pay period, not the day that the employee had claimed.

Despite the good faith mistake, the court awarded the employee her wages, over $2,000 in waiting time penalties and another $4,500 in attorney fees. In this case, the employer also had to pay its own attorney fees.

While the size of the award relative to the size of the original claim is uncommon, the results for employers in disputed Labor Commissioner claims are all too common: the employer loses and pays far more than the actual wages due.


The Benjamin Solution

In many cases, the best way to cheaply and expeditiously resolve these claims is to settle with the employee before the Labor Commissioner Conference. When a complaint for unpaid wages is filed, the Labor Commissioner holds a “settlement conference” before a hearing is set. “Settlement” is in quotes because the conference almost never results in a settlement for a number of reasons.

First of all, the deputy labor commissioners are not expected to pressure employees to drop even obviously meritless claims. Labor Commissioner Julie Su has ordered all claims to be set for hearing where the employee refuses to withdraw even in the face of overwhelming evidence that no wages are owed.

Secondly, many deputy labor commissioners will use the settlement conference to point out additional penalties or wage claims the employee can add to their complaint. Rarely are claimants persuaded to accept a settlement at these conferences; usually they walk out dreaming of an even bigger payout.

The solution in many cases is to try to settle with the employee individually before the settlement conference. That’s when “Benjamin” as in Benjamin Franklin comes in. Set up a meeting with the employee and try to settle. Bring cash in an amount that is appropriate for the claim, preferably in $100 denominations and a simple release of the wage claim covering all wages, interest, and penalties. Unless the employee is bent on revenge, the sight of some “Benjamins” and a quick payday will help you avoid a hearing, a potentially much greater award, and possible attorney fees.

This approach works well with production employees, clerical staff, and others on the lower end of the pay scale. It is well suited to technical wage claims, late final checks, unpaid expenses, and claims for meal and period penalties where there is little evidence to support such claims.

There are circumstances where the “Benjamin Solution” is not likely to work, including highly compensated staff, terminated employees seeking revenge, and employees who have or are likely to file discrimination claims. Such claims could be settled with a more sophisticated approach by a management official who commands the respect and trust of the disgruntled employee.

The most important part for employers of any resolution is the Release of Claims. Employers should resist the temptation to use a multiple page, over-broad release full of legalese. Such forms may dissuade the employee, lead to a claim that he or she did not “understand” the release or induce the employee to seek legal help.

I prefer a simple release of “all wages, penalties, and interest” in plain English and translated into plain Spanish as necessary. It should include known and unknown wage claims using the specific language of Civil Code Section 1542. The release should cite any labor commissioner claim number, but extend to “all wage claims.” Finally the release should be no longer than a single page.