Authored by Steve Holden. Published in the Sacramento Business Journal May 2019.
California has a subindustry that attacks employers. It is comprised of plaintiffs’ attorneys that pursue wage and hour claims on behalf of employees. It is sanctioned by the government and has been wildly successful in transferring the assets of employers to employees and the legal profession. Its success is the result of two key facts: (1) California law makes employers easy and attractive targets and (2) too many employers do not take adequate steps to protect themselves.
There are a multitude of things employers should do to protect against wage and hour claims. This article will focus on just one; how to handle requests for employee records properly. In recent years we have seen a dramatic increase in the number of requests for payroll and personnel records made directly by law firms representing former employees. The increase is impacting all employers regardless of the size or industry. The requests are sanctioned by California law and a definite precursor to litigation or threatened litigation. In addition to the legally-authorized request for records, the communications often include misleading information, threats and requests for employers to sign unnecessary agreements in the spirit of “settlement.”
First and foremost, any correspondence from an attorney or a law firm should raise a red flag. Information and documents should never be provided to potential opposing counsel without careful consideration and consultation with an expert in handling such requests and defending employment claims; particularly wage and hour claims and class actions. Too often unsuspecting employers mistakenly believe they have nothing to fear. They rush to comply with the due date and satisfy the request without first considering the strategy that may be necessary to adequately protect the organization. Though seemingly innocuous, these requests can result in a form of legal extortion and will always cost more than expected if not handled correctly. Unfortunately, because of the structure of the law, even if an employer is fully compliant with the law it can cost thousands and thousands of dollars to prove it if the employer has not taken care in properly structuring its policy administration and documentation.
Too often employers have a knee-jerk reaction and send the requesting attorney all the documents requested, especially when the employer believes they treated the former employee fairly and are in full compliance with the law. Unfortunately, employers are often wrong about their level of compliance and even more wrong about whether or not their documentation will clearly demonstrate the compliance. Specific statutes outline what an employer is required to send as well as what they are required to provide these former employees and their attorneys. The requests received are almost always overly broad and many of the documents need not be provided. Employers should act rather than react to records requests. The knee-jerk reaction of sending off documents to a plaintiffs’ attorney virtually eliminates the opportunity for strategies that may effectively discourage claims and litigation.
The moral of the story; contact an experienced attorney immediately if you receive correspondence of any kind from an attorney or law firm. In a recent case, the employer would have spent about $500 for the strategic advice and would have saved just under $500,000.