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In a case of first impression, the Wisconsin Court of Appeals for District III (Wausau) recently ruled that an employer who pays overdue wages prior to an employee commencing suit is relieved from the wage penalty obligations under Wisconsin law. The Court of Appeals held in Hubbard v. Shawn Messer, d/b/a Degree Systems, Case No. 02-1701-FT that no penalty was appropriate on the wages that were previously owed to the plaintiff, Neal Hubbard, but were paid by his former employer, Shawn Messer, before Hubbard started his lawsuit. The Court of Appeals reversed the Circuit Court's order that awarded a 70% penalty on the wages previously owed, along with Hubbard's attorney fees.
Employers should take seriously the DWD administrative/investigative process. These types of claims should be reviewed in detail "up front" and addressing them should not be delayed. If there is a valid claim, the employer should pay it and not wait for the employee to commence suit or hope the employee "just goes away." If an employer pays an undisputed amount of a claim before the employee starts a lawsuit, and there remains a disputed amount, the penalty wages should only be based on the remaining disputed amount and not the original amount claimed.
The Court of Appeals' holding in Hubbard will encourage employees to either bypass the administrative process with DWD and go right to court, or file suit far sooner after exhausting the administrative process in order to have available the wage penalty and attorney fee recoveries under Wisconsin law. The court still has discretion to award the full penalty or a percentage of it, and if an employee bypasses the DWD, the maximum potential penalty wages drop from 100% to 50%. However, once an employee's claim has been filed in court, the stakes will go up as to what the potential recovery will be.
For more information on this case, see our May 2003 Issue of the Month at www.krukowski.com.
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