February 2013

By: Alan E. Seneczko, Esq.

What is the real cost of a claim for alleged unpaid wages? Does $112,000 in attorney fees for a $3,650 wage claim sound reasonable? The Wisconsin Court of Appeals did not think so – but only because the circuit court failed to properly explain its reasoning for reducing the plaintiff’s fee to $10,000. (The circuit court attributed it to “mutual over-litigation based on emotion”). Johnson v Roma II-Waterford LLC, 2012AP1029 (Wis. Ct. App. 2013).

Federal law requires, and Wisconsin law permits, the award of reasonable attorney fees to employees who prevail in claims for alleged unpaid wages (e.g., minimum wage, overtime, unpaid hours worked, etc.). When determining what is “reasonable,” courts are permitted to consider “over-litigation” as a factor in reducing seemingly excessive fees, with a number of other factors. In fact, the appellate court noted that while the circuit court did not lack “potentially legitimate reasons for at least some reduction,” it provided no explanation or evidence to support the substantial reduction it made and appeared to shift the entire blame for the excess on the employee – despite having made findings that suggested both parties were equally to blame. It therefore remanded the case for even more litigation.

The case serves three purposes – none having anything to do with how to calculate “reasonable” attorney fees. First, it is a telling illustration of the cost of emotion in litigation. I have often said, “emotion is an attorney’s best (and most lucrative) friend,” and this case demonstrates that point in spades. Second, attorneys representing employees in wage claims often hold the specter of massive future attorney fees as a means to increase leverage (and dollars) in settlement discussions, even at the onset of a claim. It is important to recognize the potential for such an award – as well as the attorney’s responsibility to act reasonably in connection with the litigation (easier said than done, I know). Lastly, and most importantly: Do it right the first time! Become familiar with the law and make sure that you are paying your employees accordingly. This is particularly true when dealing with employees who are paid a “salary” in order to avoid overtime compensation.