Litigation FAQ: Are My Attorneys’ Fees Recoverable?
One of the first questions many attorneys are asked when a client is considering filing a lawsuit is whether the fees and costs they will incur in the litigation are recoverable. In virtually all personal injury and property damage cases and in many business disputes, under what courts have dubbed the “American Rule,” the answer is no. Because the cost to a client of pursuing a claim is an important factor to be considered when evaluating a case (a $100,000 claim that will cost $50,000 in unrecoverable fees and costs to litigate is only worth $50,000 even if successful), knowing when and how fees can be recovered is key. In this series of posts, we will explore “fee-shifting” including when it is available, which party has the burden of proof and how that burden can be met, what courts will look at when deciding if and how much to award, how a party that intends to seek its fees can lay the groundwork for a successful recovery as the litigation progresses, and the recovery of costs. There are four major categories of cases in which the prevailing party can claim attorney’s fees: Cases in which it is mandatory or discretionary under the federal or state statute at issue for the court to award the prevailing party its reasonable attorneys’ fees (e.g., Fair Labor Standards Act, Civil Rights Act, State and Federal trade secret claims, State and Federal Class Actions, State Consumer Protection Act claims, State Unfair Claim Settlement Practice Act claims); Breach of contract claims in which the contract at issue entitles a party to recover the fees it incurred in an action to enforce the contract; Fees authorized by common law (e.g., in certain jurisdictions, an insured that is compelled to litigate with its insurer to obtain a defense under a liability policy can recover the fees associated with the coverage action); and Breach of contract claims in which an element of the damages caused by the breach are attorneys’ fees (e.g., in Maryland, where an insurer breaches a policy’s duty to defend, the insured can recover the costs of its defense). In all of the above scenarios, the party that intends to seek recovery of attorney’s fees must include a claim for attorney’s fees in their complaint. Under Maryland state law, different fee-shifting scenarios are governed by subsections of Maryland Rule 2-703, and reference to the appropriate rule section should be included in the complaint. In the first three categories above, the reasonableness of the attorney’s fees is generally litigated in a post-judgment fee petition, while in cases where fees are an element of a party’s substantive damages claim, they will likely be litigated as part of the case itself like any other category of damages. In our next post, we will address the burden of proof applicable to a fees claim and whether an expert should be retained to support a fees claim. In the meantime, if you would like the experienced attorneys at Luchansky Law to review your contracts to ensure that they include an enforceable attorney’s fees provision, give us a call at (410) 522-1020 to set up an appointment.
Deflection is Not the Best Defense to a Wage and Hour Claim
Ideally, employers that are faced with valid overtime or minimum wage claims should focus on working with their attorney to accurately evaluate their exposure and identify the most efficient way to resolve the claim. While this advice seems self-evident, too often employers do not heed it. Instead, frustrated by the cost of defending the claim and potentially settling it, and stung by the fact that the employees are ungrateful for all of the money they have been paid, employers often focus on the shortcomings of the claiming employee(s) and on the many reasons why those employees do not deserve to be paid anything more than what they have already received. That is an ill-advised approach and should be avoided. Deflecting is Short-Sighted First, it distracts the employer from focusing on gathering and communicating the facts, data, and documents that their attorney actually needs to evaluate the claim and provide advice as to how to proceed. Second, it clouds the employer’s judgment when it is time to make the decision as to whether to settle the claim, turning what is usually a business decision into a personal one. Third, it does not help the employer’s case. Rarely does an employee’s consent to how they are paid, or the employee’s legal status, performance, attitude, or personal conduct have any effect on their right to pursue a wage and hour claim or the potential success of such claims. One example that arises—often in cases against employers in the service industries such as restaurant owners, cleaning companies, and construction contractors—is the employer’s focus on employees’ immigration status or their unwillingness to fill out an I-9 or W-4. Not only will these facts not prevent the employee from recovering, but they actually expose the employer to liability for violations of federal and state law. Any attempt to use the employee’s status against them, and any implication that the employer will report the employee to state or federal authorities, will be viewed as retaliation against the employee and will likely increase the employers’ potential lability. Most Excuses are Not Legally Justified Similarly, “My employee requested that I pay him by the day,” “My employee agreed to accept more money per hour and not receive overtime pay,” or, “My worker asked me to classify him as a 1099 independent contractor instead of an employee,” will not absolve an employer from the consequences of failing to maintain records and pay employees as required by law. Ultimately, the governing state and local statutes and regulations place the responsibility for verifying the legal status of employees and compliance with applicable deduction, withholding, and record-keeping squarely on employers and their claims that they violated those laws as a favor to their employees will not protect them. Citing employees’ substandard performance as a basis for an offset against unpaid wages owed in a wage and hour case is likewise a non-starter. Even if employees showed up to work drunk, did not meet productivity expectations or workmanship standards, or were guilty of other misconduct while on the job, they must be paid for the time they worked. The time to discipline or terminate an underperforming employee is when the conduct is occurring. It is too late to attempt to “clawback” wages for non-productive time on the job after a wage and hour claim is filed and wage laws strictly limit the circumstances under which an employer may make a deduction from wages. In a perfect world, employers would carefully comply with all statutes and regulations as they pertain to employee documentation, record-keeping, and compensation. However, in the real world, when an employer faces a legitimate wage and hour claim, they should avoid the urge to finger point or blame-shift. Instead, they should focus on the legitimate defenses available, the efficient resolution of the claim, and implementing the fixes needed to avoid future claims. If you have received a wage and hour demand letter or lawsuit, or if you want to have your employment practices reviewed to limit the possibility, please contact us at (410) 522-1020 to schedule a consultation.
$10 Million Awarded by North Carolina Jury to White Male Executive Is Costly Reminder to Employers That Efforts to Diversify Must Be Lawful
Employers of all sizes and in all industries are striving to bring diversity to their workforces, including at the management level. Employers would be well-served, however, not to lose sight of the fact that Title VII of the Civil Rights Act of 1964, which governs discrimination in employment, protects all employees from discrimination on the basis of their race (or other protected classification)—including white males. A North Carolina jury sent this message loudly and clearly in a recently decided case. Novant Health is a Winston-Salem-based network of clinics and medical centers. A white male former Senior Vice President of Marketing and Communications claimed that he was discriminated against when he was replaced by a black woman and a white woman as part of his employer’s diversity efforts. Racial discrimination claims by white employees, and gender discrimination claims by male employees, often are referred to colloquially (and somewhat dismissively) as “reverse” discrimination claims because the civil rights laws were enacted at a time when women and minorities primarily were suffering from discrimination. Nevertheless, the laws themselves are written in neutral terms—they prohibit employers from discriminating against any applicant or employee “because of” race, gender, or other immutable characteristics. Therefore, if an employer fires an employee “because of” his white race and male gender, then the employer has violated the discrimination laws. That is precisely the conclusion that the North Carolina jury reached in the case brought against Novant Health. The price tag for this violation was not cheap. The jury awarded the white male management employee $10 million. Employers should not be lulled into a false belief that because replacing a white employee with a non-white employee or a male executive with a female executive may bring them closer to their goal of increasing diversity, they are immune from a Title VII employment discrimination claim. Ultimately, if the replaced male or white employee can prove that they would not have been terminated but for their race or gender, they can successfully pursue a Title VII discrimination claim, potentially with very expensive consequences to the well-meaning employer. The lesson should be an obvious one, but in today’s cultural climate it bears repeating. Employers should make employment decisions based on merit, and they should apply objective standards relating to qualifications and performance. Employment decisions should not be based on an individual’s immutable classifications protected by law—which means neither deciding against nor in favor of any candidate or employee based on their race, sex, sexual orientation, or other protected classification. If you are an employer that is planning a personnel decision and are concerned that it may result in exposure to an employment discrimination claim, or if you have received an EEOC charge or have been sued for alleged employment discrimination, the experienced lawyers at Luchansky Law are ready to help. We can be reached at (410) 522-1020 or at www.employmentattorneymd.com.
The Latest on President Biden’s Executive Order to Promote Competition in the American Economy
Nearly four months ago, President Biden issued an executive order in which he urged the Federal Trade Commission to explore enacting rules to curtail the use of non-competes and other agreements that impede worker mobility. In the days and weeks that followed, there were myriad articles and blog posts published by employment lawyers (present company included), constitutional scholars, and HR gurus examining the legality of the federal government regulating employee/employer contracts and what effect the promulgation of a regulation severely limiting or even banning non-competition agreements would have on the business world. Today, nearly four months later, the FTC has not taken any action, and there is virtually no “buzz” about the issue. It is possible that the Biden Administration has been distracted by other more pressing issues, such as Afghanistan, a bogged-down supply chain, efforts to pass infrastructure and spending bills, or curbing parental interaction with school boards. It is also possible, and one can only hope, that cooler heads have prevailed, recognizing that, as discussed in one of our previous posts, (1) many states were already on their way toward either restricting the use of non-competes or banning them altogether to protect vulnerable employees who lack the bargaining power to resist or refuse them or (2) that a federal regulation like the one urged by the President would face a strong constitutional challenge. For now, the use and enforceability of non-competes are still governed by state law. In Maryland, this means that, preferably, employers should make sure that non-competes are signed before employment begins. If an employer wants an employee to sign an agreement while already employed, the agreement should specifically identify the consideration the employee is getting in exchange for signing the agreement. In Maryland (though not in some other states), this can be something as basic as “in consideration for continued employment.” In Maryland, non-competes signed by employees earning less than $31,200 a year or $15.00 an hour are unenforceable. Employers also should be careful not to overreach with regard to the geographical scope of the non-compete. Courts will balance the employer’s legitimate interest in protecting against an employee trying to capitalize on relationships developed with the employer’s customers during his or her employment against placing an overly burdensome restriction on the employee’s ability to work. Courts also will make sure that any restriction is limited to a reasonable time period. Maryland courts generally enforce two-year restrictions but rarely have enforced three-year restrictions. Non-competes also should not restrict an employee from working for a former or potential future competitor of the employer. It remains to be seen when, or even if, the FTC will attempt to implement President Biden’s executive order. In the meantime, Luchansky Law’s attorneys will be monitoring developments closely and are available to explain how existing state laws and potentially any new regulations affect your company’s non-compete agreements. We can be reached at (410) 522-1020 or at www.employmentattorneymd.com.
Healthcare Employers: Don’t Learn About the FLSA “Learned Professional” Exemption the Hard Way
A widespread myth regarding the FLSA is that employees who are “on salary” do not need to be paid overtime. This misunderstanding of the law creates a significant risk that healthcare entities may be violating the law by failing to pay their employees overtime merely because they are salaried. While being paid on a salary basis is a requirement for a healthcare employee to be exempt from overtime, the employee’s duties must also qualify for one of the FLSA exemptions, which, for healthcare workers, is most often the “learned professional” exemption. In order to qualify for the learned professional exemption, an employee must be paid a minimum of $684 per week or $35,568 annually on a salary basis. In addition, the employee’s primary duty must be the performance of work requiring advanced knowledge in a field of science or learning, and the advanced knowledge must customarily be acquired through a prolonged course of instruction. Work requiring “advanced knowledge” is work that is predominantly intellectual in character and which requires the exercise of discretion and judgment. These requirements can be easily applied to some employees in a healthcare setting, such as a physician (generally exempt) on one hand, and a medical records clerk on the other (non-exempt). The exemptions applicability to other positions at a healthcare facility is not as clear-cut. Generally, a registered nurse, who must complete multiple years of training and education and is subject to examination by a state licensing board is exempt from overtime payment under the FLSA. Conversely, a licensed practical nurse or a medical aide would generally not be exempt from overtime even if paid on a salary basis. Nurse practitioners, who generally undergo a higher level of training than RNs, would generally be exempt if they are, in fact, practicing medicine. Similarly, physician assistants who have completed a four-year course of study including graduating from an accredited PA program and who have received commission certification, are generally exempt when actually practicing medicine. Medical technologists who have completed a total of four years of study including a year at an accredited medical technology school also may be exempt. However, the mere fact that an employee such as an x-ray technician or ultrasound technician is regularly involved in the use of medical technology is insufficient alone to meet the requirements of the exemption even if earning a salary. A registered dietitian working in a clinical setting who is responsible for counseling individuals with health problems, such as patients with diabetes or dialysis patients, would also generally be exempt from overtime if paid on a salary basis. If you are concerned that you may have incorrectly classified a healthcare worker as exempt from overtime, ask the following three questions: (1) Is the employee being paid a salary of at least $684 per week or $35,568 annually? (2) Is the employee performing a job for which they needed to complete a significant number of years of education and that is subject to oversight by a licensing board? (3) Is the employee permitted to exercise judgment and discretion in the performance of their job? If an employer cannot definitively answer “Yes” to each of these questions, there is a distinct possibility that they have misclassified the employee. Correctly applying the learned professional exemption can be challenging, while misapplying it can have significant and expensive consequences. If you own or are an administrator of a healthcare entity and need guidance as to how to classify employees, the lawyers at Luchansky Law are here to help. Call us at (410) 522-1020.
Increased Hiring Means Employers Should Perform a Criminal Background Check Check-Up
Governor Hogan’s recent decision to end Maryland’s participation in the federal enhanced employment benefits program and to reinstate the requirement that those collecting unemployment benefits resume their efforts to find work is likely to spur a hiring increase around the state. Employers looking to hire would be wise to verify that their hiring practices and procedures comply with Maryland’s relatively new criminal record/background check laws. The law, known informally as “Ban the Box,” was passed by the Maryland legislature over Governor Hogan’s veto in February 2020, just before the employment challenges created by Covid-19. It prohibits a Maryland employer with 15 or more full-time Maryland employees from inquiring, at any time prior to the first in-person interview, as to whether a potential employee has a criminal record or has been accused of criminal conduct. Full-time employees can include those employed on a seasonal or temporary basis. In-person interviews include telephone and videoconference interviews. Employers that violate the law more than once are subject to a $300 fine for each employee from whom a prohibited inquiry was made. Significantly, a Baltimore City ordinance that has been in effect since 2014 and which applies to employers with 10 or more full-time employees in Baltimore City is even more restrictive. It prohibits covered employers from inquiring as to whether an applicant applying for a job in Baltimore City has a criminal record or has been accused of a crime or conducting a criminal background check prior to the employer making a “conditional offer” to the prospective employee. The “conditional offer” may be explicitly conditioned on the results of a criminal background check. Significantly, the Baltimore City ordinance includes a provision allowing the Baltimore Community Relations Commission to recover lost wages, compensatory damages, and attorney’s fees on behalf of an applicant who was subjected to an unlawful inquiry. Both the Maryland law and the Baltimore City ordinance exempt employers that are required to inquire as to a prospective employee’s criminal history by federal law or another state law, as well as employers that provide services to minors and vulnerable adults. Employers that are subject to either of these laws should take a fresh look at all written and online applications to ensure that they contain no questions, or boxes that need to be checked, that relate to an applicant’s criminal history. Employers that use a single application in multiple states that includes criminal background questions should consider modifying the application to clearly indicate that Maryland residents should not respond to those questions. Employers should also remove references to criminal history from job postings and advertisements. Finally, employers that use recruiters or other third parties to screen potential employees should provide clear instructions that no inquiry be made into an applicant’s criminal history until the point in the process when it becomes permitted. If you have any questions about the legality of your application process, or if you are facing a claim or government inquiry into your hiring practices, the attorneys at Luchansky Law are here to help. Give us a call at(410) 522-1020.
President Biden’s Recent Executive Order on Promoting Competition in the American Economy Differs Significantly From President Obama’s Approach to A Similar “Problem”
President Biden’s July 9, 2021, executive order, in which he urged the Federal Trade Commission to explore enacting rules to curtail the use of non-competes and other agreements that impede worker mobility, marks a change in approach and scope from President Obama’s efforts to address the same issue. First, in his October 2015 “State Call to Action on Non-Compete Agreements,” President Obama urged state governments to eliminate the use of non-competes for certain classes of workers based on earnings, particular occupations (public health/safety), and the circumstances of the employee’s separation from employment (lay-offs, termination without cause). Perhaps in response to President Obama’s efforts, or because of the prevailing trend against non-competes, since 2016 at least 16 states have taken action to limit the use of such agreements. Maryland is one of those states. In 2019, Maryland enacted legislation prohibiting the use of non-competes for low-wage employees. More recently, the District of Columbia banned the use of non-competes in virtually all circumstances. The goals of President Biden’s recent order, by contrast, include having a federal agency severely curtail, if not banned altogether, the use of non-competes and pursuing federal enforcement actions against employers who violate the regulations. In light of the general movement by state governments to protect employees from unnecessary or onerous non-competes, it is unclear whether there was any practical need for President Biden to make non-competes a federal issue (other than his campaign promise to do so). Whatever President Biden’s motivation, any rules proposed by the FTC almost certainly will be met with blistering pushback from the business/corporate community during the required public notice and comment period. Any ultimate enactment also is likely to result in a flurry of litigation over the constitutionality of the federal government attempting to regulate private employment contracts. It remains to be seen whether the FTC’s implementation of President Biden’s order will resemble Maryland’s more limited approach, which focused on protecting more vulnerable workers with limited bargaining power, or D.C.’s blanket ban on non-competes. Either way, Luchansky Law‘s attorneys will be monitoring developments closely and will be available to explain how any new regulations affect your company’s non-compete agreements. We can be reached at (410) 522-1020 or at www.luchanskylaw.com.
Courts’ Decisions in FFCRA Cases Offer Guidance to Employers Facing FFCRA Claims
With 14 months having passed since the Families First Coronavirus Response Act (FFCRA) took effect, the number of decisions by U.S. District Courts relating to claims arising from violations of that law is increasing. The arguments made by employers and employees in these cases, and how courts have addressed those arguments, can provide valuable insight to employers facing similar claims. In a decision issued on May 28, 2021, a federal court in Missouri considered an employer’s argument that an employee could not recover back pay, front pay or punitive damages arising from an FFCRA retaliation claim. The employer argued that FFCRA regulations incorporated regulations arising from the Fair Labor Standards Act which allowed recovery of “lost wages,” and thus the employee could only recover minimum wage and liquidated damages. The court disagreed with the employer and found that, while “lost wages” is not defined under the FLSA, it is an open-ended term which could include back pay and front pay. The court did conclude, however, that punitive damages were not recoverable in an FFCRA retaliation claim. An employer’s qualification for the “small employer” exemption to the FFCRA, applicable to employers with fewer than 50 employees, may not be enough to support dismissal of a complaint. One Florida employer argued that the claim against it should be dismissed because “it would qualify for an exemption” from the FFCRA’s leave requirements because it employed fewer than 50 people and that enforcement of the law against it would jeopardize its viability as an ongoing business. The court denied the motion to dismiss because the complaint did not include allegations that would demonstrate that the employer had taken the statutorily required steps to qualify for the exemption or that it qualified for the exemption. Significantly, this decision does not foreclose an employer from demonstrating, in an early motion for summary judgment, that there is no dispute of material fact that it had made the necessary determination that it was eligible for the exemption. In a Kentucky case, a federal court granted an employer’s motion to dismiss because the complaint did not allege that the quarantine instruction or the employee’s other communication with the employer at the time of the leave request included a proposed end to the leave. Furthermore, the quarantine instruction relied on by the plaintiff was signed by a registered nurse who did not come within the statute’s definition of “health care provider,” and the notice did not include the employee’s name because it was issued to the employee’s spouse, though it was to apply to the entire family. The lesson here is that employers faced with FFCRA claims should carefully go back and re-examine all documentation submitted by an employee in support of their request for leave. In another Florida case, an employer argued that its termination of its employee, who generally worked as many hours as needed, while he was awaiting the results of a Covid test could not serve as a basis for recovery because it would not have had work for him even if he was available due to a reduction in its workforce caused by Covid. The court denied the employer’s motion for summary judgment, concluding that even though it was undisputed that the employer had reduced its workforce, there were still issues of fact as to whether the employee would have been given some work had he not been terminated. The take-away from this case is that an employer that plans to argue that an employee would have been terminated for reasons other than FFCRA-protected conduct must be prepared to support that argument with specific, detailed evidence. At Luchansky Law, our lawyers can provide valuable advice and representation to employers facing FFCRA claims. Please give us a call at 410-522-1020 if we can be of service
Federal Court Rejects Employees’ Attempts to Recover Unpaid Wages and Overtime Under Maryland Law for Workweeks in Which They Did No Work in Maryland
In a recent decision that appears to address the issue for the first time, U.S. District Court Judge Peter Messitte ruled that Maryland wage and hour statutes did not entitle members of a class of cable/telephone/internet technicians to recover unpaid wages and overtime earned during workweeks in which they did not perform any work in Maryland. In the case, styled Boyd, et al. v. SFS Communications, LLC, many of the class-member plaintiffs had performed work in multiple states and/or the District of Columbia during the relevant timeframe and sought to recover under Maryland law for all hours for which they had not been fully compensated regardless of where the work been performed. They argued that as long as the defendants were Maryland employers that were subject to liability for violating Maryland law, all unpaid wages and overtime they had earned during the relevant time frame could be recovered under the Maryland Wage Payment & Collection Law and the Maryland Wage & Hour Law. Had that argument been successful, the plaintiffs would have been able to seek treble damages (which are not available under the Fair Labor Standards Act) for all work they performed. The court rejected the employees’ argument, noting that Maryland’s wage and hour statutes were modeled after the FLSA, which permits recovery only for workweeks in which an employee performed work in the United States. Thus, by analogy, Maryland statutes only permit recovery of unpaid wages or overtime associated with workweeks in which at least some work was done in Maryland. The court also cited Maryland’s general presumption against application of Maryland statutes outside of Maryland absent specific language indicating the legislature’s intent that the statute’s reach be so extended. This is an important decision for Maryland employers that face wage and overtime claims from employees who perform work both inside and outside of Maryland. If employees cannot demonstrate that they performed work in Maryland during a particular workweek, a strong argument can be made that they cannot recover treble damages arising from that workweek even if they prove that the failure to pay was not the result of a bona fide dispute. The decision also demonstrates the importance of an employer of maintaining records of where its employees performed their work. Of course, employees whose claims encompass some workweeks in which they worked in Maryland and others in which they worked exclusively in another jurisdiction can bring claims under the laws of both jurisdictions in addition to their FLSA claims. At Luchansky Law, our attorneys are continuously monitoring federal and state developments related to wage and hour claims and have significant experience litigating such claims. If you have questions about the classification of or compensation due your employees or have received a claim letter or lawsuit alleging the violation of wage and hour laws, we can help. Please call us at 410-522-1020.
Sexual Orientation Discrimination In The Workplace
SUPREME COURT HOLDS THAT CIVIL RIGHTS ACT OF 1964 PROHIBITS DISCRIMINATION IN EMPLOYMENT BASED UPON SEXUAL ORIENTATION In a 6-3 decision that decided three pending cases, the Supreme Court held that the prohibition in the Civil Rights Act of 1964 of discrimination in the workplace based upon “sex” prohibits discrimination based upon sexual orientation as well. The three cases which led to the decision were brought by two men who alleged they were fired because they were gay and a transitioning transgender worker who was fired after informing her employer that she would no longer present as a man. The decision is significant because there is no federal statute explicitly protecting the employment rights of LGBT workers and less than half of the states had passed laws prohibiting discrimination based upon sexual orientation. If you have are an employer facing an employment discrimination claim, please call Luchansky Law at 410-522-1020 to arrange a consultation.
