When it comes to calculating the exact cost of failing to pay employees correctly, many employers forget to add in the winning employee’s attorneys’ fees. In many cases, it pays to settle such cases early on because the tab for the other side’s attorney can quickly grow very large.
Recent case: Mold-Ex found itself on the losing end of a failure-to-pay-commissions case. The company might not have realized the size of the legal tab it would have to pay.
The winning side’s attorney impressed the court that was hearing the case. He testified that he had over 40 years’ experience in disputed commissions cases. He normally charged about $350 per hour. The court approved his claim that he had spent over 225 hours on the case and ordered the losing side to pay an additional $77,875. (Michigan Technical Representatives v. Mold-Ex, et al., No. 04-73648, ED MI, 2008)
Final note: It’s a good idea to discuss all potential litigation costs with your attorneys as soon as litigation starts—even as soon as an EEOC complaint hits. Include the complaint in the case evaluation. If the case has some merit, it may save considerable time and money to settle the case early. Otherwise, you risk having to pay the employee’s attorneys’ fees in addition to your own.
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