When employees think they’ve been mistreated and seek the advice of a lawyer, the result is often a demand letter sent by the employee’s lawyer to the employer. The employee (or ex-employee) may claim to have been discriminated against, paid incorrectly, wrongfully terminated, or otherwise subjected to unlawful employment practices. The demand letter usually describes the alleged mistreatment, says why the employee believes it’s against the law, threatens to pursue legal action, and demands payment in exchange for an agreement not to bring a claim or lawsuit.
It’s never fun to receive a demand letter, of course, and the threat of legal action should always be taken seriously. Ultimately, the facts and circumstances of the particular situation—and how the law applies to those facts and circumstances—will determine how the employer should respond. In every situation, however, it is worth knowing some basic guidelines for handling demand letters.
Have a protocol. Demand letters can be addressed to an owner, the CEO, the HR Manager, or others. All managers and supervisors should be trained to recognize a demand letter and should know what to do with one when it arrives. The letter needs to find its way to the employer’s in-house or outside lawyer quickly.
Don’t overreact. A demand letter is not a lawsuit and may never lead to one. It may be a very serious threat or it may be posturing. If the letter includes a deadline for response, be mindful of it but remember that it’s not a court-imposed deadline. Recognize that a demand letter may represent
an opportunity to defuse and avoid a lawsuit in the making. Remember that any
response could be admissible evidence in a lawsuit.
Don’t retaliate. In many cases, employees and ex-employees have a protected right to claim that they have been victims of unlawful employment practices.
Discrimination claims, claims of retaliation for
whistleblowing, and
wage and hour claims, among others, are protected by statute.
Retaliation can create a whole new set of legal problems. The opportunity for retaliation to occur is most likely when the demand letter comes from a current employee, but even ex-employees can experience retaliation if the employer reacts to a demand letter by cutting off benefits, refusing to pay earned wages or severance, or giving a bad reference.
Don’t destroy evidence. Parties to a lawsuit have a legal duty to preserve evidence, and destroying evidence can result in serious
penalties. A demand letter, even though it only threatens a lawsuit and doesn’t actually start one,
may trigger this duty. All information that could possibly relate to the claims made in the demand letter must be kept confidential and protected.
Check insurance coverage and notice requirements. If insurance coverage exists for the claims described in a demand letter, the carrier may require
notice of a potential claim. Check policy language to determine when and how to provide notice and protect coverage.
Don’t gossip. It’s tempting to talk about a demand letter. The circumstances leading up to it may make for juicy gossip, and it can be interesting to speculate about what will happen as a result of the demand. Such talk is seldom productive and may make things worse. Discussion should be limited to those who need to be involved, and instructions about confidentiality and privilege from the employer’s lawyer should be carefully followed.
