New York Restaurants Are Targets For Wage Dispute Cases

There is a new trend of claims over wage disputes that is forcing hospitality business owners to defend themselves in actions brought by their employees, many of them former employees, and their lawyers. In essence, the lawyers filing the suits are looking to prove that all deserved employee wages were not paid.

Federal and state laws allow the plaintiff's attorneys to collect fees when bringing forward what is commonly referred to as "collective actions" or "class actions." The cost of defending against a collective or class action can be exorbitant for a small business owner, particularly if uninsured. Plaintiffs, often, with encouragement from attorneys seeking to do this type of work, have incentive to see their cases proceed through litigation because they do not need to pay for their attorneys' fees up front. If successful with a suit, those fees are collectible from the defendant.

Tara C. Fappiano from the firm, Havkins, Rosenfeld, and Ritzert claims, "while not every claim lacks merit, small business owners are often finding that it is less expensive to settle even meritless claims to avoid the pitfalls and expense of being involved in a long, drawn-out class action litigation. Indeed, the costs of such a litigation have the potential to put some business owners out of business."

Under Federal Law, representative employees are allowed to bring an action for and on behalf of themselves and "other employees similarly situated." Even before discovery is completed, these employees may ask the Court to "conditionally certify" the action. This means that the employees' lawyers are then permitted to send out notices to the business' "similarly situated" employees, current and former, which essentially invites those employees to join the lawsuit. The standards for granting this request are relatively liberal and difficult to defeat. Certainly, this procedure, which has its own price tag for defendants, and for which plaintiffs may be reimbursed fees, creates a financial and administrative hardship for business owners, not to mention an issue with their business reputation, particularly in cases that lack merit.

What can a restaurant owner do to protect themselves from these claims? Certainly, the first step is to become familiar with the applicable wage laws and make every effort to comply. This includes keeping accurate records. Businesses should consider retaining a lawyer to perform an employment law compliance review, to stave off potential suits, and demonstrate that the business made good faith efforts to comply with applicable laws, in the event of a suit. Such a demonstration may defeat a claim for attorneys' fees and liquidated damages.

There is also insurance available to cover Employer Practices Liability (EPL). According to the LRP Jury Verdict Research Database, small employers with 15-100 employees were the targets of 41% of employment-related claims. Ira Holm, a New York commercial insurance broker, says "RSI Insurance get calls a least twice a week from restaurant owners saying they are being sued over employment related issues." In recent surveys, 74% of businesses defended an employment related lawsuit in the last three years, mostly wage and hour dispute and discrimination claims. Indeed, employment matters have become the number one cause for litigation in the last three years.

For more information Contact Ira Holm at 914-332-1700 or Tara C. Fappiano at 914-682-2636 or Carmen A. Nicolaou 914-682-6889