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Md.: Legislature Creates New Procedure for Employees Pursuing Wage Claims

By BLR® —Business & Legal Resources  11/13/2013
During the recent legislative session, the Maryland General Assembly enacted a law that creates an entirely new procedure through which an employee who believes he is owed unpaid wages can attempt to obtain a lien against his employer for the wages. Significantly, the procedure allows for the entry of a lien before the employee is obligated to demonstrate the merits of the wage claim.

The new statute took effect Oct. 1, 2013.

Maryland has long had statutes under which employees may pursue a legal claim for unpaid wages, including the Maryland Wage Payment and Collection Law (MWPCL) and the Maryland Wage and Hour Law (MWHL). Lawsuits filed under either the MWPCL or the MWHL follow the same procedural manner as any other civil claim, with the employee having to prove her claim at trial before the court enters an order compelling payment by the employer. During the 2013 legislative session, the Maryland General Assembly enacted a law that may dramatically affect the manner in which claims for unpaid wages are pursued.

House Bill (HB) 1130, which was signed by Gov. Martin O’Malley on May 16, 2013, adds a “Lien for Unpaid Wages” subtitle to Maryland’s Labor and Employment Article. The statute creates a detailed procedure under which an employee who wants to pursue a claim for unpaid wages may obtain a lien for the amount claimed before initiating any civil action (e.g., claim under the MWPCL or the MWHL).

The first stage of the process requires the employee to serve the employer with written notice identifying the amount of the wage claim and the property over which a lien is sought. The statute calls for the Maryland Department of Labor, Licensing and Regulation (DLLR) to issue regulations specifying the form of the notice to be used. As of press time, no regulations have been issued, and the amount of detail required in the notice therefore remains unknown.

Once notice is served, the employer has the burden of initiating judicial action contesting the claim. The statute specifies that the employer’s filing must contain a statement of defenses to the amount of wages claimed, accompanied by an affidavit supporting the employer’s position. If the employer fails to file a complaint in court within 30 days of receiving notice of the wage claim, a lien is automatically entered in accordance with the terms of the employee’s notice.

If the employer files the necessary pleadings to dispute the lien, the statute directs the court to decide within 45 days whether the employee is entitled to the lien. If the court does find that a lien is appropriate, the employee will automatically receive an award of the attorneys’ fees he incurred in obtaining the lien. If a lien is entered, it can be recorded against the real or personal property of the employer and would generally have the same effect as other liens entered in the commercial context.

HB 1130 represents a marked departure from existing Maryland law on wage claims. The law creates an attractive opportunity for employees and their attorneys because the lien procedure promises an opportunity of relief within 45 days, as opposed to the much lengthier litigation process for actions under the MWPCL and the MWHL. Of greater concern, however, is the fact that the law fundamentally shifts the onus of initiating court action from the employee to the employer and creates a significant risk that inaction by an employer may waive its valid defenses to a potential lien.

Specifically, the law provides that the initial notice is to be served in the same manner as a summons issued in a civil proceeding. If the employer is a corporation or another similar entity, there’s a possibility that the officer or agent served with the notice may not appreciate its importance, in which case the employer may waive its right to contest the lien by failing to timely respond. It’s therefore critical to ensure that the people authorized to accept service of process on your company’s behalf understand the new law and that you be prepared to make an immediate response if you receive notice of a claim. Immediate action is essential. Once service occurs, the clock begins ticking to initiate court proceedings or be faced with a fait accompli in which your company’s real or personal property is suddenly encumbered with a lien.

Contributed by BLR®—Business & Legal Resources. Read plain-English analysis on Fair Labor Standards Act (FLSA) in Maryland.