You’ve Received Notice of a Labor Commissioner Claim – Now What?

If your company receives a Notice of Claim and Conference from the California Labor Commissioner’s Office, do not take it lightly. The notice indicates that an employee or former employee has filed a wage-related claim against your company and that the Labor Commissioner’s Office will investigate and adjudicate the matter. It’s important to get out in front of the claim from the outset and prepare a well-supported response to protect your company’s interests. 

Understand What the Notice Means

The Labor Commissioner’s Office, known formally as the California Division of Labor Standards Enforcement (DLSE), has offices around the state where employees can receive free assistance and file claims for issues such as unpaid wages, overtime, vacation pay, and related penalties. After a claim is filed, the Labor Commissioner’s Office typically schedules a settlement conference and provides the employer with a notice describing the allegations and stating where and when the employer must appear. At the conference, a Deputy Labor Commissioner will meet with the employer and employee to determine whether the claim can be resolved without a formal hearing and to facilitate a settlement if possible.

Prepare for the Conference

The conference gives employers an important opportunity to resolve the matter before it proceeds to a formal hearing. If the employer fails to appear, the matter will likely proceed directly to a hearing. To prepare for the conference, consult an experienced employment lawyer promptly. Review the employee’s allegations, preserve and gather relevant records, investigate the facts, and assess your potential financial exposure. Key documents may include timesheets, payroll records, employment agreements, handbooks and policies, PTO records, and communications with the employee. Counsel can help you evaluate what the employee is claiming, what the evidence shows, what the law requires, and the potential financial exposure if the matter proceeds. That analysis provides a factual and legal basis for determining how to approach the conference and whether settlement makes business sense. Although the conference is informal and the parties are not under oath, employers should be mindful that statements made during the process may impact future proceedings.

The Hearing

If the matter is not resolved at the settlement conference, it proceeds to a wage claim hearing. The hearing is more formal than the conference, with both sides presenting testimony and evidence and examining witnesses. Wage claims often turn on the underlying records, so a persuasive defense should directly address the employee’s allegations and connect the applicable law to the evidence. After considering the testimony and evidence, the hearing officer issues an Order, Decision or Award (ODA). 

The Appeal to the Superior Court

Either side may appeal the ODA to Superior Court within the applicable deadline.  An appeal to Superior Court is a trial de novo, meaning the case is heard anew.  The Superior Court will consider the evidence and testimony presented in the new proceeding rather than reviewing the Labor Commissioner’s decision.

But an appeal exposes an employer to a lot of additional risk – and potentially a huge additional cost.  Under California law, if an employer appeals a Labor Commissioner award to the Superior Court, the employer has to pay the employee’s attorneys’ fees and costs incurred in that appeal unless the employer’s appeal is a complete victory that reduces the employee’s recovery to zero.  Anything short of a complete victory – meaning, any outcome where the employee is awarded even a penny – means that the employer must pay the employee’s attorneys’ fees.  Those fees are almost certainly going to $75,000 or more.  Considering that the employer has already paid their own lawyers that amount or more, an employer who appeals and fails to reduce the employee’s recovery to zero is likely going to be out-of-pocket $150,000 or more.

This pro-employee fee shifting provision does not work in the reverse.  Even if an employer has a complete victory in the appeal and reduces the employee’s award to zero, the law does not allow the employer to recover its attorneys’ fees from the employee unless the employee’s claims were found to be “frivolous.”  That’s an incredibly low standard that makes it almost impossible for an employer ever to be awarded attorneys’ fees in a Labor Commissioner appeal action.

Given this fee-shifting, employers should not view an appeal as an opportunity to fix weaknesses in their initial defense. The better strategy is to build the strongest possible case from the start, to go to the Labor Commissioner’s hearing fully prepared, and to make there, in that hearing, the most compelling factual and legal arguments for why the employee’s claims are not valid.

The Takeaway

Employers should respond promptly and thoughtfully to a Notice of Claim and Conference from the Labor Commissioner’s Office. Preserving relevant documents, reviewing payroll and personnel records, identifying witnesses, and developing a thorough legal and factual defense with experienced counsel can help you put forward the strongest possible case 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.