Authored by Steve Holden. Published in the Sacramento Business Journal February 2012.
For most employers, getting a demand letter from a law firm is about as welcome as a sharp stick in the eye. Demand letters come in all shapes and sizes, and most commonly “demand” money, documents or both. Because too many egomaniacal lawyers are disabled with the belief that threats achieve results, many of the letters also include direct or implied threats. Often the threats are based upon exaggerated or flatly erroneous statements of law. To the uninitiated employer, however, such threats can cause understandable stress and anxiety.
Increasingly, plaintiff’s lawyers use demand letters like fishing nets to toll for employment claims. The demand is most commonly made on behalf of a recently terminated employee, and relies upon several Labor Code provisions that give employees certain rights to personnel files and employment documents.
The rule for providing access and copies of personnel files is simple: Employees are entitled to inspect their personnel file at reasonable times and entitled to obtain copies of documents they have signed relating to their employment. But, it is not that simple. Under one section of the Code employees have the right to inspect “the personnel records that the employer maintains relating to the employee’s performance or to any grievance concerning the employee.” That definition is arguably narrower than the entire contents of a personnel file. Note that this is an “inspection” right, not a right to obtain copies. Moreover, the inspection right does not apply to letters of reference, investigations of possible criminal conduct and other specified documents.
Another section of the Code gives an employee or applicant the right to obtain a copy of any document signed by the employee or applicant “relating to the obtaining or holding of employment.” Again, that definition is narrower than all documents signed by an employee. It is important to note that both sections refer to “employees” and make no express grant of rights to former employees. While a strong argument can be made that former employees do not have these same rights based upon the plain language of the statutes and statutory construction rules applied by the courts, the California Labor Commissioner has opined that former employees are entitled to the same rights.
The rule for providing access and copies of payroll records is simple: Current and former employees are entitled to inspect or obtain copies of their pay stubs, and employers have 21 calendar days to comply with a request to inspect or obtain copies. But it is not that simple. An amendment to the statute last year creates ambiguity. The statute relates to and references the rule requiring employers to provide employees with a detachable pay stub containing specific information. Thus, the inspection and copying requirement could relate only to the employer’s copy of the pay stubs. Unfortunately, the amendment, which on its face did nothing more than require farm labor contractors to include additional information on their pay stubs, also changed the language describing employers’ obligation to produce records. Whether the change was a devious broadening of employers’ obligations or a thoughtless mistake cannot be gleaned from the Legislature’s reports on the bill. The statute now states that employees and former employees have the “right to inspect or copy records pertaining to their employment.” This new language raises the question of whether the inspection and copying right applies to all employment records and not simply the pay stubs or payroll records.
Ambiguity in the law and the involvement of lawyers go hand in hand. Understandably, most people do whatever they can to avoid lawyers and legal matters. So, when an unsolicited letter shows up from a lawyer demanding anything, stress and anxiety are very common and understandable. It is worse when the letter makes direct or implied threats of dire consequences and is written on behalf of a recently terminated employee. It immediately invokes concerns of defending a wrongful termination lawsuit. The concern is justified, but an excess of concern can result in a careless and costly response.
The response can be costly if the employer provides information that encourages the lawyer to pursue a case on behalf of the terminated employee, or worse, a class action lawsuit. A properly structured response should be designed to discourage the lawyer from pursuing litigation.
It is important to remember that a demand letter from an attorney is not a subpoena. A subpoena is a command from the court to produce documents. A demand letter, regardless of the threatening language used, is a request to produce documents. That is not to say that an employer can choose to ignore a demand without consequence. Failure to comply with the Labor Code provisions could result in a misdemeanor conviction, monetary penalties and sanctions, including the payment of the requesting attorney’s fees.
Nevertheless, employers have a wider range of strategic options in responding to demand letters. Those options can be critically important in reducing the risk of litigation and reducing the cost of litigation should a suit be filed. The best way to preserve those options is to act quickly upon receipt of the demand letter. First, document how and when the demand letter was received. Second, do not take any action and do not speak with anyone, particularly the attorney making the demand, until you have a game plan. Third, talk to someone knowledgeable about employment litigation who can analyze the situation, provide strategic options and develop a game plan for responding to the demand letter. Following these steps is the best way to relieve stress and reduce the chances that the production of records or communications related to the demand spurs a costly lawsuit.