A demand letter lands on your desk, and your stomach drops. Before you panic — or tuck it in a drawer — listen to what California employment attorney Ward Heinrichs has to say. On this episode of Big Blend Radio's "California Employment Law" Podcast, San Diego attorney Ward Heinrichs walks through a sample demand letter, explains the two very different kinds of letters employers receive, and shares when settling early can be a smart business decision — plus a few poker metaphors, because it really is a bit like a card game.

Listen to the Podcast Below, or Watch on YouTube (episode airs at 4pm PT today):

Ward explains that "demand letter" can mean two different things. The first is a request for records: a letter asking for the documents California law entitles an employee to get without filing a case, such as wage statements, time cards, personnel files, and anything the employee signed. That is mostly a document-gathering exercise, and Ward's usual advice is to send the letter to him so he can sort out what must be turned over. The second is what he calls the traditional demand letter: the employee's attorney says their client has evidence of Labor Code violations or a wrongful termination, lays out the claims, and asks for money. The two are often combined in a single letter. And not every demand names a dollar figure. Some propose mediation, or simply say a lawsuit is coming if you don't respond.

Ward's first piece of reassurance: a demand letter isn't always an emergency, even though it can ruin your day. Many come from high-volume plaintiff firms sending out lots of similar letters, and those are usually easier to resolve than a letter from a trial lawyer who truly believes they have a strong case and isn't interested in a small, quick settlement. Either way, pretending you never received it isn't a strategy. The other side can simply file a lawsuit.

If a case is filed, Ward says, you'll be paying attorney's fees by the hour, and if the employee has any justifiable claim you may be paying theirs too, since in California it is next to impossible for employers to recover their attorney's fees. Insurance can help if you carry the right kind, but there is usually a sizable deductible. Add lost business time, stress, and uncertainty, and settling for an amount you're not thrilled about can still be the sound business call. That doesn't mean you always pay. Sometimes the answer is "you don't have a case," and Ward has seen that work, by his rough estimate about one time in five, which means a real risk the other side files anyway. As Lisa put it, it's a lot like playing poker when you can't see the other hand.

The sample letter Ward shared is very specific about the sick-leave and wrongful-termination claims, but only general about missed meal and rest breaks. Ward says that's a common pattern: meal and rest period allegations are among the most frequently asserted claims, and they're often thrown in without much support. Demand letters tend to include everything under the sun, he explains, because the sender wants you to see strong evidence and a valuable case.

On meal periods, Ward notes that a duty-free meal break generally has to begin before the end of the fifth hour of work, with some exceptions and waivers. The best protection is a clear written policy that managers actually follow. If an employee skips a break, the employer should counsel them that it's against policy and escalate if it keeps happening. Employers must provide the opportunity to take breaks, not force anyone to take them, and an enforced policy shows you did. A manager telling people to skip breaks because it's too busy is a very different story.

Ward also points to a California law, about a decade old, that allows managers, owners, and other agents to be held personally responsible for certain wage violations if they were involved in the decision. That's why demand letters so often name individuals along with the company, and why forming an LLC is not the cure-all many people assume.

A demand letter doesn't have to arrive by certified mail, Ward says, and he can't recall ever seeing one where it was required. Discrimination and harassment claims do require a filing with the California Civil Rights Department before a lawsuit can be filed, but that doesn't have to happen before a demand letter goes out.

Lisa asked the question many owners wonder about: what happens if a demand is more than the business has? Ward explains that a bankruptcy filing brings an automatic "stay" that halts the lawsuit, and if the business and its owners are truly underwater, the claim may be discharged. That's also why plaintiffs often ask to see tax returns and financial records before agreeing to a smaller number.

Ward's closing advice is practical. Most plaintiffs will have a hard time putting together a strong letter and supporting it with the right facts on their own, and an employer who responds without an attorney risks not being taken seriously. A lawyer who has handled many demand letters can gauge whether it's a bluff, help find the defense, and present it clearly. As Ward puts it, "no one likes litigation except for attorneys," so think carefully about how involved you want to be.

Ward shared a sample demand letter to go with this episode. It is a fictional example, for educational purposes only and not legal advice, and it follows the second type of letter he describes: a detailed wrongful-termination claim with wage-and-hour allegations folded in.

Ward joins us every fourth Wednesday on Big Blend Radio. As new California laws get signed this fall, watch for his annual "what's new" episodes in December and January, since most new laws take effect January 1.

Have a Question for Ward? Ask us on our Contact Page.