Employers Take Notice: New Maryland Wage Lien Law Changes the Landscape

In Maryland, effective October 1, 2013, there is an interesting new law which: (1) may become an effective tool for employees to collect wages from recalcitrant employers, (2) may become a real problem for employers, and (3) may overburden the court system.

Under the new Wage Lien Law, an employee can serve a notice of lien on an employer that has failed to pay wages; and if the employer fails to contest the lien by filing an action in the Circuit Court to dispute the lien, then the lien will become final. To pursue collection on the lien, the employee must then file a lien statement with the land records office for liens on real estate and with the Maryland State Department of Assessments and Taxation for liens on personal property. The lien will be enforceable like a UCC lien against personal property, or a Judgment Lien against real property against the assets which have been liened. The employee can also be awarded his legal fees associated with the lien case at the Circuit Court hearing.

A link to the Wage Lien Law is here: 

Two definitions under the law are of particular importance:

• The definition of employer under the new law is expansive, and includes not only the   corporate entity for which the employee is working; but also the persons in control of the entity and its payroll.  Therefore, the employee will be able to lien not only the assets of the business, but also of these control persons.
• The definition of wages does not include commission payments. Therefore, these claims will typically not be very large unless the employee has tolerated not being paid for multiple pay periods.

 The Circuit Court will be required to adjudicate these employer lien challenges within 45 days of filing. That is a very short time from filing to hearing for many of the already very busy Circuit Courts. It will be interesting to see whether that timing requirement is honored by the Courts, or whether they will simply schedule hearings in the normal course and disregard the 45 day rule.

One problem that I see is that if an employee sends a notice that he is owed less a $1,500.00 or so in wages, when he is not in fact owed that sum, or if it at least is a disputed claim, will the employer spend the funds necessary to hire counsel to defend such a claim? Or, will the employer settle with the employee or pay the employee the amount claimed simply in order to avoid the legal fees and costs of contesting the lien.

Under the law, if the employee’s wage claim is frivolous, then the Court can award the employer its legal fees, but it is often difficult to show that a claim is frivolous, and collecting your legal fees from a disaffected (maybe unemployed?) former employee can be a real challenge.

If you are an employer who has been served with a wage lien notice, it will be important to act quickly and contact counsel to advise you as to how to proceed.

For another perspective on this, and some links of interest, take a look at the blog post of a very experienced lawyer who pursues many wage collection claims for employees: Rubin Employment Law Blog

New Maryland Case on Attorney's Fee Awards - Fixed Percentage Fees in Promissory Notes & Post-Judgment Attorney Fee Awards

The Maryland Court of Special Appeals recently addressed an issue that affects lawyers and other contract and promissory note drafters. In Suntrust Bank v. Goldman, the Court ruled that actual reasonable attorneys' fees incurred are the proper measure of an attorney fee award even where the promissory note calls for a fixed percentage fee based on the amount of the obligation due.

In the case, Sunstrust's Credit Line agreement provided that Suntrust was entitled to an award of attorneys' fees equal to 15% of the principal due "or reasonable attorneys' fees allowed by law." Suntrust asked for an award of $60,206.00 (15% of the balance due) and the Circut Court for Baltimore County awarded actual attorneys' fees of only $3,094.00.

The Court of Special Appeals agreed with the Circuit Court. The Court's opinion is here. Specifically, the Court held: "Thus, Maryland law limits the amount of contractual attorneys fees to actual fees incurred, regardless of whether the contract provides for a greater amount. The contract may provide that the amount of fees is determined by a percentage or some other method, but to comply with the indemnification requirement, the amount of fees paid pursuant to the agreement between the claimant and its attorneys must equal or exceed the amount provided for in the contract."

The Court also dealt with the issue of attorneys' fee awards for post-judgment collection efforts, and seemingly recommended that if a creditor wanted to be able to pursue reimbursement for post-judgment colection efforts, it could include clear language in its agreements providing that the parties intend that the attorneys' fee provision shall not merge into a judgment on the agreement.