You’ve Received a Demand Letter – Now What?
For California employers, receiving a demand letter from a current or former employee is cause for concern. While the letter does not necessarily mean a lawsuit will follow, it should never be ignored or handled informally. How you respond in the early stages after receiving the letter can affect your legal position and your options for resolving the dispute efficiently.
What Is a Demand Letter?
A demand letter, typically sent to the employer by the employee’s attorney, details how the employer allegedly violated the employee’s rights and demands a specific amount of compensation and/or another remedy before an administrative claim or lawsuit is filed. Alleged violations may include wrongful termination, wage-and-hour violations, discrimination, sexual harassment, failure to provide legally required leave, or another claim. The letter will typically include a deadline for response.
How Not to Respond
When you receive the demand letter, do not put it in a drawer and ignore it. This will only offend the plaintiff’s lawyer, which could lead to unnecessary escalation. Also, do not contact the plaintiff or the plaintiff’s counsel. You may think this is “all a big misunderstanding” that you can sort out with a phone call, but you’re wrong. A lawyer who spent time and money drafting a lawsuit isn’t going to drop the suit simply because you’ve called or emailed. Instead, that lawyer is going to take everything you said in your call or email and use it against you in the litigation. Don’t let that happen.
The Best Way to Respond
Immediately after receiving the letter, start the process of selecting counsel. Look for an attorney or law firm with expertise in the issues referenced by the demand letter. It is also helpful if the attorney has experience dealing with the plaintiff’s law firm, because an existing relationship between counsel can go a long way in resolving the matter. When attorneys already share mutual respect and built-in trust, negotiations tend to be less adversarial, more efficient, and less expensive.
Also, start collecting relevant documents immediately, including the employee’s personnel file and payroll records. It is also crucial to lock down your corporate email and other communication platforms, such as Teams, Zoom, and texts, so nothing can be deleted or moved. If relevant evidence disappears after you have received the demand letter, you may be sued for additional claims. Notify your employees that if they have texts or other electronic communications with this employee, they must preserve these messages.
Provide Your Attorney with Relevant Information
Once you have retained counsel, give your lawyer the demand letter and all relevant background material, so that your attorney will know the facts – names, dates, payroll records, and details about key events – before reaching out to plaintiff’s counsel.
Every employer wants the matter to go away as inexpensively as possible. But how you get there depends on the allegations, the facts, and the employer’s wishes.
For a relatively minor dispute, the best strategy is generally for your attorney to reach out and start exploring whether an acceptable compromise can be reached. But if it’s the type of matter that could develop into serious litigation with ugly, colorful charges, it’s critical to show confidence and strength while also demonstrating a willingness to talk and explore reasonable solutions. In short, these initial conversations require finesse, and you need an attorney who understands that.
You don’t want to appear weak, but you don’t want to pound your chest and be overly aggressive, either. With California employment matters, plaintiff’s lawyers know that if the dispute escalates, labor laws, along with many juries and judges, are often on the employee’s side. Moreover, in some workplace disputes brought by employees, the employer will be responsible for paying the employee’s attorney fees. This means that, if you fight for the sake of fighting, you’ll be paying your own lawyer more (to conduct that fight), and you could be paying the plaintiff’s lawyer more too (to defend against your lawyer’s fighting). This drives up attorneys’ fees significantly, which makes the case harder and more expensive to settle. In short, it’s critical that you and your lawyer adopt a smart, finessed strategy from the get-go so that you can keep communication avenues open and explore possible resolution without appearing weak, afraid, or unwilling to fight.
The Takeaway
A demand letter is not cause for panic, but it does need to be taken seriously. Your response can set the tone for everything that follows and help determine whether the dispute is resolved efficiently. By retaining experienced counsel, gathering the facts, preserving relevant evidence, and providing your attorney with the information needed to strategize effectively, you can choose the best path forward to protect your company’s interests.
Jeffrey S. Sloan is the Managing Shareholder of Workplace Legal, APLC, an employment law firm with offices in San Francisco, Oakland, and New York. For over 30 years, Jeffrey has represented businesses of all sizes, as well as high-level executives and professionals, in complex labor, employment, and HR matters.
