How To Respond to an Attorney Demand Letter
It's Friday afternoon, and you are just wrapping up a busy week at your company. You love your business, but you are looking forward to the weekend. That's when you receive a letter.
It's from an attorney and a law firm you have never heard of. They are demanding the records of a former employee. This is called an attorney demand letter. What do you do?
It seems like a fishing expedition. Should you hand over the records they are demanding, or are you shooting yourself in the foot if you do?
That stress-free weekend you were looking forward to has just disappeared.
What is an Attorney Demand Letter?
If you run a successful business in California with employees, you will likely receive a demand letter from an attorney at some point.
For most non-labor matters, demand letters are straightforward. They ask you to either do something or stop doing something.
Labor demand letters are different. Most people who read them with a layman's eye find them vague in some cases and, in others, full of exaggerated claims paired with huge demands for money. Understanding what you are actually looking at and why it was sent is the first step to responding correctly.
The Legal System That Makes This Possible
The United States allows anyone to sue anyone else for any reason. If a lawsuit has no merit, it may eventually be dismissed, but not before expensive motions are filed and money is spent on defense.
The mistake some employers make is assuming a weak lawsuit will go away on its own. The opposite is true. Even the most frivolous claim can result in a default judgment if it is not responded to within the time limits set by civil procedure, typically 30 days in state court and 20 days in federal court.
Ignoring a demand letter is never the right move.
Why Labor Law Gets Weaponized Against Employers
Labor laws exist for a legitimate reason: to protect employees who may be in a disproportionate position of power. When used as intended, they serve an important purpose.
The problem is that a select number of attorneys use these same laws primarily for financial gain. More and more, the incentives built into California's labor system are attracting attorneys who file claims regardless of merit because the math works in their favor either way.
Three Reasons Attorneys Are Motivated to Sue You
Here are three crucial reasons that result in you being sued:
1.
You Pay Their Fees If You Lose, Even Partially
If the plaintiff's attorney wins on even one cause of action, you, as the employer, must pay all of their attorney fees.
Picture this: a jury awards the employee a nominal $5,000 judgment. But the total judgment you receive is $250,000 because it includes 18 months of the opposing attorney's legal fees. Even a technical loss on a minor point can trigger this outcome. It is easy to see why so many attorneys are entering this space.
2.
Juries Tend to Side With Employees
Most jury members are employees themselves, often with their own experiences of workplace grievances. As a result, employers frequently find themselves in the position of having to prove they did nothing wrong, rather than the plaintiff being required to prove their case.
Even when an employer is clearly in the right, a jury may award a nominal amount as a gesture of solidarity, and that nominal award can quickly become a six-figure bill once attorney fees are applied.
3.
Most Businesses Settle to Avoid the Fight
Many businesses treat litigation as a cost of doing business and settle for less than the potential cost of going to court. In some cases, when there is a genuine violation and opposing counsel is reasonable, that can be a sound strategy.
But settling an unreasonable demand sets a dangerous precedent. Once an attorney knows you will pay to make a problem go away, you become a reliable target. The same attorney can sue you multiple times, and California law does not allow you to enter into an agreement preventing them from doing so again.
If you have not broken any laws and the demand is not reasonable, fight and fight hard.
Received a demand letter and not sure how to respond? DefendMyBiz represents California employers exclusively. Book a free 15-minute consultation and get a clear picture of what you are facing.
How to Protect Your Business in This Environment
California remains one of the best places in the world to build a business. But running a company here requires staying ahead of the legal landscape. Here is what you can do to reduce your exposure:
Stay current on labor law.
New laws and requirements emerge every six to twelve months. If you have not reviewed your procedures in the past year, there is a good chance something has changed. Our Employment Law Compliance Guide is a practical starting point.
Be fair and consistent with employees.
The employees most likely to sue are those who feel they were treated differently or unfairly. Consistent documentation and clear policies go a long way.
Build a solid hiring process.
It is far easier to hire the right person than it is to manage the legal fallout from a difficult termination. If a separation does become necessary, our Termination Risk Assessment guide walks through what courts look for in high-stakes separations.
Have a signed arbitration agreement with every employee.
A properly drafted arbitration agreement keeps disputes away from a jury, requires each party to pay its own attorney fees, and is one of the most effective tools an employer has left in California.
One critical note: boilerplate arbitration agreements downloaded from the internet rarely hold up. California courts and employee-side attorneys actively look for weaknesses in these documents. Yours must be valid, current, and drafted by a qualified employment attorney.
If wage or hour issues are part of the demand letter you received, our Wage and Hour Defense service explains exactly how those claims escalate and what your options are.
What To Do If You Receive a Demand Letter
Do not panic. Do not ignore it. And do not respond without legal guidance.
The letter may look aggressive, but receiving it does not mean you have already lost. Many demand letters are sent as opening moves in a negotiation, not as definitive statements of liability.
The first step is to get a clear-eyed assessment of what the letter actually says, what it can realistically lead to, and what your best response is.
DefendMyBiz offers a free 15-minute consultation for California employers. Tell us what is in the letter, and we will give you a clear outline of what to expect and what to do next. Book your free consultation here.
FAQs
What is the difference between a labor demand letter and a regular demand letter?
Do I have to respond to an attorney demand letter?
Should I hand over the employee records they are asking for?
Is it always better to settle a labor claim than fight it?
What is an arbitration agreement, and why does it matter here?
Disclaimer: The above content is for informational purposes only. This is not legal or tax advice. Laws, IRS guidance, and withholding requirements can change, and outcomes depend on specific facts. You are advised to contact a qualified attorney for any legal advice.
