WHAT TO DO IF YOU ARE SUED ON A MINIMUM WAGE CASE
– IT IS NOT JUST ABOUT THE MINIMUM WAGE CASE ITSELF
Both Federal and State laws contain provisions setting forth requirements that employers must meet in paying their employees. These “minimum wage” laws address the minimum amounts that must be paid to employees for regular and overtime work and further address which work-related expenses an employer must pay for. Such laws also require an employer to provide certain notices and statements to employees, including notices about the amount of pay, terms of pay and hours to be worked and the “gross pay” earned and deductions utilized in calculating “net pay”. The “minimum wage” laws can be intimidating to business owners and employers because they are very specific and vary according to many factors. These laws can pose significant difficulties to an employer that is (1) unfamiliar with the wage requirements or (2) otherwise unprepared to meet those requirements.
The Importance of Retaining Counsel at an Early Stage
Employers facing allegations that they violated the minimum wage laws will require the assistance of an attorney. Allegations against an employer are typically pursued through one of two avenues – (1) an investigation by the Department of Labor and/or subsequent civil or criminal prosecution, or (2) a civil action initiated by employees claiming to have been aggrieved by the alleged violations. In either situation, an employer should obtain sound legal advice in a timely manner from an attorney familiar with this particular type of case. This advice should be sought as soon as the employer is made aware of the allegations.
Where the Department of Labor commences an investigation, a seasoned lawyer familiar with this area of law may be able to effectively negotiate a desirable resolution or minimize any potential consequences to the employer, if the lawyer is retained early enough in the process. The earlier the lawyer is retained, the more opportunity there will be for the lawyer to resolve it without the need for court proceedings.
Where a civil action is initiated by an aggrieved employee, it is done so through a civil complaint, which must be responded to in a timely fashion. There are deadlines that must be complied with and the failure to meet those deadlines could result in a judgment by default. If the complaint is answered in a timely manner but without the advice of a lawyer, there will be no default in responding to the complaint. However, there may be significant defenses that will not be raised in the response – since they are likely to be outside the knowledge of one who is not a lawyer – and this could result in the loss of that defense permanently.
Knowing and Understanding Your Defenses and Exposure
Defending minimum wage cases requires a working knowledge of the requirements – imposed by state and federal law – concerning wages that must be paid to employees. Proper legal representation also requires an understanding of the potential civil and criminal penalties that an employer may face. An employer faced with criminal charges of violating the minimum wage laws faces fines and, under certain circumstances, jail time, if convicted. An employer who is sued in a civil lawsuit could, if found liable, be required to pay the wages owed to the employee – which includes regular pay, overtime pay and “spread of hours” pay – as well as liquidated damages, which is a set amount of damages added to the amount of compensation owed.
It is important for employers facing such allegations to know their rights and options. The employer may not owe money to the employee at all. If the employer does owe money, the amounts claimed to be due by the employee may be far in excess of what that employee is legally entitled to. Analyzing the true amount of liability – if such liability exists – requires an understanding of the calculations to be made, with a consideration of state and federal law as well as several additional factors, including but not limited to available credits and liquidated damages.
There are often unfair and inaccurate assumptions made about an employer’s motives when cases are brought on behalf of workers claiming to have been underpaid. Plaintiffs will always claim that an employer acted in bad faith. The truth of the matter is that, while there are employers that knowingly violate the laws, there are several that violate these laws without even realizing it. Some of the requirements are obvious but several are not. For example, while most recognize that an employee must be paid 1.5 times the regular hourly wage for overtime hours (those exceeding 40 hours in a given week), many are unfamiliar with the phrase “spread of hours”. This phrase refers to the legal requirement that an employer pay an employee one extra hour of regular pay for each day in which the employee spends more than ten hours in a given day at the job.
If the employer does not have records to produce concerning the wages paid to an employee – or if the employer has insufficient records – defending a minimum wage claim will be more difficult. To begin with, the employer’s failure to maintain records of wages paid to employees – in and of itself – is a violation of the law. As such, while several defenses are available in these cases, the absence of documentation of the wages paid will make some of those defenses more difficult to assert. In such an instance, doubts are often resolved against the employer.
After The Litigation – The Program of Compliance
Legal representation of an employer against allegations under the minimum wage laws must obviously address the defense of the lawsuit itself, including any viable defenses and the most appropriate disposition. Such representation, however, should also include sound legal advice concerning future obligations with respect to these laws. Otherwise, the employer may find himself back in the same legal predicament again.
Advice about future obligations will help the employer develop a general familiarity with wage requirements. Familiarity with the general wage requirements is essential toward compliance. It is obviously difficult for one to comply with a law that he or she does not know of and/or does not understand. Some employers choose to “wing it” and operate based upon the general assumptions they have concerning what employees must be paid.
Programs can be designed in advance to ensure compliance with existing laws – this can protect employers from viable claims (since the employer is complying with the law) and can also protect employers against frivolous claims, since a sound program of compliance would necessarily include the maintenance of wage records. Employers will naturally be concerned about the costs of implementing such a program. While hiring an attorney costs money and it will take some time to set up such a program, the time and cost need not be as burdensome as you might expect. While there is a learning curve involved, the principles can be effectively implemented with little effort after a workable system is developed. Furthermore, the costs of not establishing a program can be far more than it would cost to set it up. Litigation costs in defending such a suit is one significant reason for taking the time and expense of setting up a program of compliance.
When facing pending litigation involving the “minimum wage” laws, there is a tendency to focus exclusively on the case itself. Responding to a “minimum wage” case is not just about the case itself. The pending case itself is likely to be just part of the equation. Employers often decide, after resolving the existing legal proceeding, that no further action is necessary. This often proves to be a mistake. An employer who has been the subject of legal action based upon alleged violations of the minimum wage laws may have problems with the system that the employer uses in calculating and/or distributing wages. This may be what landed the employer in the present legal proceeding. The problem may therefore go beyond the particular plaintiff that was the subject of the present proceeding. If that is the case, resolving the present legal proceeding is only a temporary band-aid – other employees could bring proceedings in the future and the employer may end up having to go through the entire process of defending a lawsuit or criminal action in the future.
Establishing a program of compliance will also benefit the employer by helping the employer utilize provisions within the law that are advantageous to the employer. An attorney experienced in such matters could prove valuable in this respect as well.
For example, there are situations in which the minimum wage amount can legally be revised based upon credits available to certain types of employers. A restaurant employer can take credit for tipped employees as well as meals provided to employees on the job. What this means is that an employer can, under certain conditions, use tips received by an employee (or meals provided to the employee by the employer) as credit toward the money paid to the employee in determining if the employer has satisfied the minimum wage requirements.
This should be done with the assistance of counsel, however. Many employers find themselves with legal troubles because they assume that they can automatically pay an employee less than the minimum wage if that employee receives tips as part of his job. There are limits, however, to the amounts that can be taken as credit. For example, while a restaurant employer can pay a tipped employee less than the minimum hourly wage under certain circumstances, such an employer is not permitted to simply pay an hourly wage of $2.00 per hour regardless of how much that employee receives in tips. Moreover, being able to take advantage of those credits requires compliance with certain conditions. Certain notice requirements must be met beforehand. If, for example, an employer has failed to provide notice to an employee at the outset of his employment that tips are being used as a credit toward the minimum wage and fails to meet additional notice requirements, the employer may be prohibited from using tips as a credit on the minimum wage amount.
Recommendations can be made to assist employers in complying with the mandatory wage requirements of federal and state authorities. There are a number of options that can be considered. There is no “blueprint”. Different businesses have different needs. Moreover, certain provisions of the law are only available to certain types of employees. For example, credits for tips cannot be taken for an employee whose primary duties do not involve the type of work that ordinarily receives tips.
Programs can be designed to accommodate the needs of a particular business. While there are certain requirements that must be followed to comply with the law, the program can be designed to meet the specific needs of specific businesses. There are also some variations and adjustments that can be made to benefit the employer while still maintaining compliance with the law.
An employer being investigated, sued and/or charged with violating the “minimum wage” laws will best be served by retaining a lawyer at an early stage and ensuring that the lawyer is experienced in handling “minimum wage” cases. The lawyer should be capable of effectively representing the employer in the pending litigation and/or negotiating with any government authorities investigating the employer, if applicable, and should also be equipped to prepare the employer for future compliance with existing wage laws.