Photo: liber

I commonly hear from employers, “why would my former employee hire a lawyer to come after me for a few hundred bucks of overtime pay?” Fair question. Since I handle employment cases for employees and employers, I wanted to come up with an answer that is fair to both sides. Due to time constraints, I will not try to cover all the arguments. But if you’re reading this post and have something to add, please comment.

View from the Employee’s side. So why would an employee or former employee hire a lawyer to go after a small sum of overtime pay? The answer is obvious for an employee/plaintiff. It’s because the employer owes the employee that money under state or federal law. The law imposes an obligation on the employer to pay overtime. The employee benefits from the law. When the employer fails to meet the obligations imposed by the law, the employee has the right to use the court system to enforce it. Small sum or large sum, the employee will often say they hired counsel because the employer shouldn’t be able to get away with not paying its employees.

Then there’s the money question: why would an employee spend money to try recovering such a small sum of money? The answer is that the employee probably won’t spend any money on a lawyer. Oregon and federal statutes allow prevailing plaintiffs to have the employer pay his or her attorney fees if they prevail in an unpaid overtime claim. Because of the fee shifting law, it makes sense for attorneys to take these cases. It usually goes one of two ways: (1) the employer pays the demand right away and the attorney takes a smaller but reasonable fee for doing a limited amount of work; or (2) the employer fights the case and the attorney pursues statutory attorney fees.

View from the employer’s side. The reality in many unpaid overtime cases is that the attorney fee provision in Oregon and federal overtime claims creates a situation where the tail is wagging the dog. It does not take much work for a plaintiff lawyer to rack up a fee that exceeds the amount of an overtime dispute. If a case is not handled correctly, an employer can face having to defend an overtime claim just to avoid a serious risk of paying attorney fees to the plaintiff’s attorney.

Unpaid overtime claims also create a risk of  “aftershocks.” For better or worse, employers are hounded by all forms of government and big business.  Taxes, permits, licenses, insurance policies, banks, workers’ compensation, unemployment, etc. Anyone who has been an employer for some time can probably imagine how problems with one area of the business can cascade into other areas. Overtime claims only increase the risk of additional headaches involving taxes, accounting, insurance, etc. This is even more true in highly regulated industries, like medical facilities, assisted living facilities, etc.

I don’t list these risks just to scare employers. I list them because they explain why workers will hire lawyers to pursue unpaid overtime claims. They do it because they have power. That power can be increased if the employee has a good attorney who is reasonable and assertive. At the same time though, an employee’s power can be reduced significantly (but not completely) if you are a responsible employer and you respond to the claims in the proper way.

Photo by kevindooley

Before you can understand employment laws, you need to understand a concept called “employment at will.” It is a very basic legal principle and it applies to almost every private employment case filed in the State of Oregon. You can think of employment at will as the canvas on which most Oregon employment laws are painted.

Oregon, like pretty much every other state in the U.S., adheres to a doctrine known as employment at will. The basic definition of employment at will would be something like: “An employer is free to make employment-related decisions for any reason or no reason at all.” In plain English, this means employers and employees are generally free to negotiate any rules, standards, policies, expectations and other guidelines they see fit. Employers can fire and discipline employees for any reason. Employees can quit whenever they please. Likewise, employers are free to maintain no rules, policies, etc.

Of course, there are rules regarding what employers can and cannot do. But it is probably more accurate to say that most employment laws are exceptions to the employment at will doctrine. Even though an employer is free to discriminate against employees in many ways (productivity, reliability, competence, etc.), there are are laws prohibiting employers from discriminating based on gender, race, religion, and status in other protected classes. And employers may be required by law to take certain actionsUnless there is a law prohibiting certain action or requiring certain action, employment at will applies and employers are free to do as they please.

Employment at will applies to more than just hiring and firing decisions. Under the employment at will doctrine, Employers are free to treat employees as well or poorly as they want. Employers can hire only their friends and may treat some employees more favorably than others. There is no rule against an employer being a jerk. There is nothing requiring a boss to be fair. Like life, employment is sometimes unfair. That is just the way it is.

So why would Oregon or any other state use such a harsh rule as a starting point? Simple – employment at will promotes a free market economy. We want employers to be able to hire those who are best suited for the work. We want employees to find the best possible work for their particular skills. Businesses are free to decide what they believe to be good for them. If an employee is not profitable, we want businesses to be able to replace that employee with someone they believe to be better. If an employee is working for a bad boss, we want them to be free to quit their job. We encourage competition and employment at will promotes competition (at least in theory). We want employers and employees to be free to negotiate terms of employment that work for both. And we want everyone to be free from too many governmental rules and restrictions. If there are too many rules, those rules create liability for those bound by the rules. Potential liability increases costs to businesses and discourages hiring, which are bad things. It’s a jungle out there.

As we’ll discuss in other posts, employment at will is just a starting point. Employers cannot really do anything they want. To the contrary, there are many other laws that are exceptions to the employment at will doctrine. For example, employers cannot make employment-related decisions based on an employee’s status in a protected class. Employers are also required to follow lots of laws regarding pay, working conditions, leave, benefits, etc. Over time, we have passed laws and implemented other measures that create basic rules that govern the employment relationship. But these laws and measures are not so much “rules” as they are exceptions to the rule of employment at will. And that’s why it is so important to understand employment at will.