Does your organization have a process in place for handling legal paperwork? If not, you risk a default judgment that could cost big bucks. If your organization is served with a lawsuit and fails to respond, a court may refuse to let it enter a late defense. And if the organization can’t participate, the court will accept as true everything the employee who is suing says in the complaint.
What’s more, the court then will determine the damages without any input from you. And as the following case shows, that can be an expensive proposition.
Recent case: Todd Michaud, who worked for U.S. Steakhouse Bar and Grill, thought the restaurant was not paying him properly. Michaud hired an attorney and sued for the hours he claimed he had not been paid, plus overtime.
No one from U.S. Steakhouse answered the complaint or showed up when the court order directed it to. Therefore, the judge issued a default judgment, took Michaud’s word for the number of hours he claimed to have worked and calculated what the restaurant owed him. It came to more than $18,000 in unpaid overtime and minimum wages.
The court then doubled the award for good measure and added another $9,000 for Michaud’s attorneys’ fees. (Michaud v. U.S. Steakhouse Bar and Grill, No. 6:04-CV-1371, MD FL, 2007)
Note: If you need more incentive to set up a system for processing legal paperwork, consider this: Some laws, such as the Fair Labor Standards Act (), allow for personal liability for unpaid minimum wage and overtime claims. has a similar provision. That means the default judgment can be collected from the personal resources of HR people just like you.
Advice: If you handle FLSA or FMLA issues, askwhat liability insurance coverage it provides. If the answer is none, check with your own insurance agent (or professional association) about purchasing coverage.