A former, disgruntled employee, apparently hired a lawyer, who just sent me a letter, demanding money to settle the former employee's claim for unpaid overtime. There is no lawsuit on file, as of yet. I don't think I owe anything, and they aren't demanding much. Should I just send the money and move on?
Although it can be tempting to try to quickly dispose of an issue, it is never a good idea to simply send money in response to a settlement demand. If so, you are simply sending money that could then be used to fund a lawsuit against you without your receiving any protections from being sued in exchange for that payment.
Consult with legal counsel. Have counsel draft a legally-enforceable waiver that the former employee could sign, releasing you from liability from any and all claims that arose during his or her employment. If the former employee is age 40 or older, the waiver must contain the specific statutory language contained in the federal Older Workers Benefit Protection Act.
Also, consult with your attorney on whether you can settle this particular demand for past wages. Please note that neither the U.S. nor the state's department of labor is a party to your agreement and could still sue on behalf of the employee. Under the Fair Labor Standards Act (FLSA), the federal law that imposes minimum wage and overtime rules, claims can only be formally settled through the Department of Labor or with court approval as "fair and reasonable."
Jack McCalmon and Leslie Zieren are attorneys with more than 50 years combined experience assisting employers in lowering their risk, including answering questions, like the one above, through the McCalmon Group's Best Practices Help Line. The Best Practice Help Line is a service of The McCalmon Group, Inc. Your organization may have access to The Best Practice Help Line or a similar service from another provider at no cost to you or at a discount. For questions about The Best Practice Help Line or what similar services are available to you via this Platform, call 888.712.7667.
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