01
These lawsuits seem like a nuisance, but they must be handled carefully.
Many employers' immediate reaction to a wage and hour lawsuit is that it is a nuisance case that can be disposed of quickly for a few thousand bucks. But thousands of companies across the state have learned the hard way that these cases are currently the biggest threat to businesses in California and often cost six- or seven-figures to deal with. The statistics on these lawsuits tell the story. They are the fastest growing type of lawsuit in California, are rarely covered by insurance, and the overwhelming majority don’t settle for under six figures (with a very high percentage in the seven figures). The legal fees can match or exceed the settlement amounts without a carefully-crafted strategy.
02
These lawsuits seem like a shakedown at first, but most end up being legitimate.
Though the lawsuit may seem like a shakedown, California law legitimizes these cases, requiring serious attention. What starts as a shakedown can reveal significant wage and hour violations with severe penalties. Even minor compliance lapses can turn these suits into six- or seven-figure threats. This often becomes clear only after extensive litigation and data analysis. Therefore, have an experienced lawyer review your policies, practices, and data to assess the situation thoroughly.
03
The plaintiff's lawyers may seem unsophisticated, but are likely advanced and well-funded.
Although the lawyers bringing the lawsuit may seem like con artists, many are sophisticated businesspeople with systems to exploit your inexperience, leading to expensive traps. These lawyers often handle hundreds of cases, becoming multi-millionaires and some of the wealthiest attorneys in California. Despite disagreements with their methods, California supports these lawsuits, and courts frequently award high six- and seven-figure fees. Underestimating these lawyers and not taking the cases seriously often leads to poor outcomes.
04
Your first instinct may be to “fight” the lawsuit, but that can be a bad strategy.
Fighting the lawsuit might be your first instinct, but it often drives up attorneys' fees on both sides, leading to larger settlements. While fighting can be part of your strategy, it should not be the entire plan. Unlike other employment lawsuits, employers typically lose wage and hour cases, resulting in large settlements and fees. Choose your battles carefully, as most courts allow these cases to proceed with minimal evidence. Plus, the law has changed recently, incentivizing compliance and remediation and penalizing employers who fight back.
05
The lawsuit seems frivolous on its face, but in California, the odds are that a non-frivolous claim will eventually be found.
Though the lawsuit may seem frivolous and the complaint exaggerated, it’s a tactic to access your payroll records, often revealing costly compliance issues. Over the past 20 years, very few wage and hour lawsuits have been dismissed as frivolous. Even seemingly baseless suits can become serious threats once an employer’s records are scrutinized. Complying with California wage and hour law is nearly impossible, and lawyers file broad complaints knowing that finding one valid claim can lead to significant victories. And even one violation means you have to pay the other side's attorneys' fees.
06
The type of worker the plaintiff was usually won't matter or get you out of a lawsuit.
You may feel surprised, hurt, and angry about being sued by a former employee. Whether the employee was a model worker or a troublemaker, their motives often don’t impact their ability to sue. Experienced lawyers prey on these feelings, leading you into costly battles. Unlike other employment claims, wage and hour cases in California focus on your policies, records, and data, ignoring the employee’s performance. Defense firms promising to fight and dismiss the case often fail, as very few cases are dismissed outright. Your defense counsel should focus on evaluating and resolving cases, not making bold promises. And if you have a PAGA case (an enforcement action on behalf of the State of California), you have a short window to try to fix the issues that led to the lawsuit or face steep penalties.
07
Although one person is suing you, they can likely represent everyone else.
Even if only one or a few people bring a lawsuit, California law allows them to represent all your nonexempt hourly employees, making the issue much larger. Most wage and hour cases involve defending or resolving claims for a larger group, not just the suing employee. California is an “opt-out” state, so one employee can initiate a costly class or PAGA action on behalf of all employees from the past several years back – without their consent. Employees rarely opt out of such lawsuits, making it unlikely to reduce potential liability.
08
While it may seem the lawsuit should not cost much in legal fees to defend, the reality is usually different.
Even if the lawsuit seems meritless, California law and courts favor employees, making it expensive to defend. Lawmakers have declared open season on employers, allowing extensive investigations into records and data. Handling historical time records for many employees is costly. Employers often underestimate the expense, which usually ranges from high-five to mid-six figures just for your own legal fees.
09
The lawsuit is likely not covered by insurance, but you should check for partial coverage.
Unless you have defended a wage and hour lawsuit before, you likely lack comprehensive insurance coverage for such cases, as it is often too expensive. If you do have coverage, it is probably limited, covering only a small portion of legal fees and requiring you to use a discount law firm. One of the first steps after being sued is to check your insurance coverage. We can help navigate potential coverage issues with your carrier.
10
Most lawyers often lack the experience or approach to handle wage and hour lawsuits.
Businesses often mistakenly hire general employment lawyers or firms appointed by their insurance for wage and hour lawsuits. These lawyers usually lack the specialized experience needed. With many such lawsuits filed annually and sophisticated plaintiffs’ lawyers, it is crucial to hire a firm with a proven track record in handling these cases. Without the right expertise, businesses risk higher costs and complications. We often rescue clients who initially chose inexperienced firms, costing them more in the long run.
NEXT STEPS
Want support navigating a wage and hour lawsuit?
If you are facing a wage and hour lawsuit, our free one-hour Case Evaluation helps you identify risks to your business, defense options, potential outcomes and costs, and solutions for immediate and future risk reduction.
During the Case Evaluation, we will cover the scope of the lawsuit, an estimate of exposure and settlement value, strategies for defense and resolution, estimated defense costs, actions to lower your exposure and what immediate next steps.
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