First, what is a wage claim? Any person who has previously worked for you, in any capacity, can file a wage claim with the Nevada Labor Commissioner for money they claim they earned but that you didn’t pay.
The important thing to know, if you don’t read any further in this article, is that the Labor Commissioner presumes the facts alleged in the wage claim, no matter how preposterous, are true. The burden is on the employer to provide evidence to disprove the allegations.
I’ve represented several clients in these matters and I’m always astonished at the way the investigator analyzes the situation. Allow me to share a couple of legal business horror stories:
In one situation, a one-woman technology company hired a consultant. The consultant had his own company in another state, ran a LinkedIn group where he guided discussions toward retaining his services, and had at least three websites promoting the three divisions of his company. Though my client had presented this consultant with an independent contractor agreement, the consultant never signed it.
Fast forward: the consultant files a wage claim, claiming that my client owed him upwards of $40,000. The investigator with the Labor Commissioner’s office, with extreme tunnel vision, wouldn’t consider the consultant as anything other than an employee because the independent contractor agreement wasn’t signed. So, I went back and did some Nancy Drew-style investigating. I printed the entity details about his corporation and his LinkedIn page. When I went to his websites, I saw that they had ALL been taken down. Undeterred, I searched the Wayback Machine and printed screenshots of all the pages showing “Contact Us for Services” and a phone number. Then, I went to WhoIs to find the owner of the domain names. Interestingly, the domains had each been recently updated. By “recently,” I mean the day the wage claims were filed, the consultant changed the contact information on his domains, but he left one piece of information behind – the phone number, which matched the phone numbers in the Wayback screenshots and the one he listed on the wage claim. To make matters worse, the reason my client had to fire the consultant was that he didn’t pass a background check performed by one of my client’s clients because, unbeknownst to my client, the guy had been previously indicted for wire fraud. Do background checks on your people, or at least Google them!
Armed with a stack of evidence supporting my client’s contention that this consultant was fabricating hours worked, with proof positive the consultant was never an employee, the investigator still sided with the consultant based on these facts: 1) the independent contractor agreement wasn’t signed, 2) the consultant had been given an @client.com e-mail address, and 3) the consultant’s company was not in Nevada. I was astonished. We managed to settle for a lot less than $40,000, but still.
Another story concerns two disgruntled employees who walked into the LC’s office, apparently hand in hand, and filed wage claims. The file numbers assigned by the LC’s office were XXX101 and XXX102. Sheesh. They actually did have contracts as salespeople, and were paid a small base salary plus commissions. The employer did not assign schedules, so the employees didn’t have set work hours. Instead, the employer asked the sales team to simply ensure at least one sales rep was on the retail floor during business hours.
Here’s what the LC decided: The base salary didn’t amount to minimum wage, so if the commissions earned didn’t amount to minimum wage, the employer had to reimburse the difference. Secondly, the hours the employees claimed they worked were taken as gospel, despite FOUR sworn affidavits I presented to the contrary, and because my client didn’t make the commissioned employees clock in and out, the employer had no way to disprove the hours claimed.
The third horror story involves an employee who was on the verge of being fired for showing up to work late, drunk, stoned, and otherwise engaging in conduct against policy. Finally, he was fired for a no-call-no-show. Three days later, the employee files a wage claim, obviously in retaliation for being terminated.
What I’ve learned from representing clients before the Nevada Labor Commissioner concerning wage claims:
- If you have independent contractors, make sure they have contracts and that they invoice you for the services they provide.
- No matter how you pay your employees (hourly, salary, commission), make sure you keep track of all hours worked. Use time sheets, a clock-in/out system, a computer logon, anything.
- Also no matter how you pay your employees, they must make at least minimum wage.
- Be prepared that if an employee is terminated, especially if the termination is hostile, that employee is likely to retaliate by filing a wage claim, a claim for unemployment, or something else to get back at you.
I say it all the time, but document, document, document. Yes, it’s a distraction from actually running your business, but it will help fend off claims like these and others that dishonest people will file against your company.