An employee’s claim for unpaid wages exposes an employer not only to potential liability for the unpaid compensation but also to the possible added responsibility for statutory penalties and liability for the employee’s attorney fees and costs; all in addition to the employer’s own legal expenses. In other words, the claim can cost an employer much more than just the amount of compensation the employee claims is owed. An employer who cares about reducing their expense in resolving any such claim should, for the reasons briefly discussed here, quickly evaluate and respond to any such claim.
Employers often react viscerally to deny and fight any employee wage claim they feel lacks merit without first realistically considering the costs they’ll incur defending the claim and the possible cost if the employee ultimately wins. The employer’s natural impulse to react defensively is even stronger when the employee owes money to the employer.
Oregon law is, however, clear that an employer can’t withhold amounts the employee owes to the employer from an employee’s compensation without incurring liability under Oregon’s wage claim statute both for the amount of the compensation owing as well as the statutory penalty and attorney fees and costs. The Oregon Court of Appeals discussed the range of cases where employers have unsuccessfully claimed a right to withhold all or a part of an employee’s compensation as a defense to a wage claim in Wilson v. Smurfit Newsprint Corp., 197 Or App 648, 663-665 (2005).
An employer should therefore carefully evaluate any claim for unpaid wages or other compensation promptly after learning of the claim and determine: (1) the likelihood that the claim will ultimately succeed in court; (2) the range of likely outcomes and the ultimate financial burden to the employer including not only how much the employee might recover but also the cost of the employer’s own attorney fees and costs as well as time spent responding to discovery requests and in testifying in depositions and in trial whether their defense is successful or not; and, (3) the best and most cost effective way to resolve the claim.
If, after considering these three factors, an employer nonetheless chooses to fight the claim they will do so fully aware of the possible consequences of their decision. On the other hand, if the employer decides that the problem should be resolved as efficiently and inexpensively as possible, it should realistically pursue settlement as quickly as possible. The employee’s attorney fees will only increase with time and delay.
© 12/21/2010 Lawrence B. Hunt of Hunt & Associates, PC
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