New Case Clarifies Standards for Attorney’s Fees in Wage Collection Cases

New Case Clarifies Standards for Attorney’s Fees in Wage Collection Cases

Maryland’s Court of Special Appeals took a close look at the issue of attorney’s fees in the unpaid wages context.  When an employer does not pay wages (including compensation such as commissions or bonuses) within two weeks of when they are due, an employee may sue in state court.  If it is found that there is no good faith dispute about the unpaid compensation, a court may award the employee attorney’s fees, and doubled or tripled damages.  The purpose for these additional damages is to even the playing field, and deter employers from withholding an employee’s last paycheck, just because it’s possible.  Because many unpaid employees are owed several hundred dollars, a relatively small amount, the legislature understood that getting legal representation was difficult.  So the law made employers face the prospect of paying double or triple the amount of the withheld wages, and the attorney’s fees spent in collecting them, to dissuade them from withholding wages for no good reason.

To show entitlement to attorney’s fees, the employee has to show that there was no good faith dispute about the money being owed.  Then, a court can decide whether the fees should be awarded; while not mandatory, the law expects that courts will exercise their discretion liberally in favor of awarding a reasonable attorney’s fee.  In the second appeal by Daniel Barufaldi against the Ocean City Chamber of Commerce, the employee complained that the circuit court invalidly denied his request for attorney’s fees, even though the jury found that the Chamber of Commerce refused to pay his commission without a good faith basis.

The appellate court agreed that the circuit court used illegitimate factors.  First, the court should not have considered the relative merits of the parties’ positions, since a jury had already concluded that the Chamber withheld the bonus pay without a good faith dispute.  Second, it determined that because the rationale for the attorney fee provision was to encourage lawyers to take these cases, “the financial situation of the defendant is not a relevant factor to consider in determining whether to award attorneys’ fees in a WPCL case.”  Without listing all important factors, the court did say that “factors that weigh in favor of denying attorneys’ fees could include the claimant’s misconduct or rejection of a settlement offer more favorable than the judgment obtained.”

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