Alternative Dispute Resolution vs. Litigation: Deciding the Best Approach for Wage Claim Defense

Wage claims can seriously impact an employer and their bottom line. These types of lawsuits can arise when an employee accuses their employer of withholding the wages they’ve earned or paying improper wages. While the litigation process can be lengthy and expensive, it’s important to understand that it isn’t the only way to resolve a wage claim in California. There are several alternative dispute resolution methods that can be used to resolve a claim efficiently and cost-effectively.

What Types of Wage Claims Can Employers Face?

Employers in California must comply with strict wage and hour laws. Even an inadvertent failure to do so can result in legal consequences. Specifically, employers should be mindful to avoid the following types of violations that can lead to wage claims in California:

• Employee misclassification
• Failing to properly classify exempt employees
• Failing to pay overtime
• Having employees work off the clock
• Failing to timely provide a final paycheck upon separation
• Asking employees to work during their lunch or rest breaks

There are several defenses an employer might raise when it comes to an employee’s wage claim in California. For example, they may be able to show that they acted in good faith and had reason to believe they did not violate the law. Or, if the employee did not timely raise the claim, an employer may argue that it should be barred by the statute of limitations. In many cases, wage claims can be resolved using a form of alternative dispute resolution, rather than litigation.

Advantages of Using Alternative Dispute Resolution for a Wage Claim

Litigating wage claims can be detrimental to a company’s profit margin and reputation. Fortunately, there are several alternatives to litigation that the parties may consider. While a claim can sometimes be resolved with the assistance of the California Department of Labor, this is not always the case. Three common methods that can be used to resolve wage and hour claims in California outside of court can include the following:

• Negotiation — Negotiation is direct dialogue between the parties in which they work to reach an agreement. Through their attorneys, the parties will discuss their objectives and viable options with a focus on reaching a settlement. An employer and employee can engage in negotiations at any time, even if the litigation process has already been commenced.
• Arbitration — Arbitration is an informal, private way to resolve wage disputes that uses a neutral arbitrator chosen by the parties instead of a judge. While this form of alternative dispute resolution takes place outside the courtroom, it is similar to a mini trial, allowing both parties to present evidence and testimony. However, the rules of evidence are flexible and the procedures are less complicated than those associated with the lengthy litigation process. Please note that arbitration is only available when both parties, the employer and employee, agree to arbitration. This is typically done pursuant to an arbitration agreement executed between the parties. It is also important to note that employers cannot make employees sign an arbitration agreement as a condition of employment. Arbitration agreements in the labor context also have other rules and laws that must be adhered to. Employers should consult with a knowledgeable employment attorney prior to submitting arbitration agreements to its employees.
• Mediation — When mediation is used, a neutral third-party assists the employer and employee with reaching a resolution by encouraging open communication and collaboration. Mediation takes place in a private setting and unlike with litigation, which takes place in an open courtroom, everything discussed is confidential. Importantly, mediation can allow an employer and employee to better understand the issues surrounding a wage claim, explore possible resolution options, and maintain amicability in the event the employment relationship will continue.

If an agreement is reached using an alternative dispute resolution method, a settlement must be drafted and executed. Once it has been submitted to the court, a judge will review it. If the agreement is fair to both parties, the judge will sign the document and it will become a binding order.

When is Litigation a Better Approach for a Wage Claim?

It’s always best to attempt to resolve a wage claim outside of court. Not only can this allow the parties to find common ground and enter into a settlement that achieves their objectives — but a judge will look at whether the parties made an effort to settle before the case will be heard in court. For wage claims that have been filed with the Labor Commissioner’s Office, a settlement conference will typically be scheduled following an investigation. Regardless of whether an alternative dispute resolution was used, or the wage claim proceeded through the administrative process, litigation may be the only option if settlement attempts have failed.

Whether litigation is the best approach to resolve a wage claim in California should be carefully considered. It’s best to discuss the pros and cons with an experienced attorney who regularly handles these types of cases on behalf of employers. In addition to evaluating the costs, risks, and potential outcome of litigation, an employer should also consider the impact on the company’s reputation and growth strategy.

Contact an Experienced California Employment Law Attorney

It’s crucial for employers to protect their rights and understand their options when it comes to wage and hour claims. The employment law attorneys at White & Bright, LLP are committed to assisting employers in California with a wide variety of employment litigation matters, including those involving wage disputes. We welcome you to contact or call us at (760) 747-3200 to learn more about our legal services.