A new Maryland labor and employment law incentivizes settling unpaid wage claims and may reduce court caseload.
A new law that will go into effect on October 1st has effectively turned the tables on who is the plaintiff and who is the defendant in unpaid wage lawsuits by allowing for the creation of wage liens.
Senate Bill 0758 and House Bill 1130 were signed by Governor O’Malley on May 16th. Known as the Maryland Wage Payment and Collection Law (“WPCL”), it enables employees to sue employers for compensation which they are allegedly owed and to recover liquidated damages and attorney’s fees if they prevail. It adds another weapon to the remedial arsenal available by permitting employees to obtain liens on their employers’ real and personal property for non-commissioned wages, allegedly owed for their services, without having to file a lawsuit.
An employee may record the lien: (1) with the clerk of the Circuit Court in the county where any part of the property is located; or (2) in the same manner that financing statements are filed under commercial law. An employee must record the lien within 180 days after serving the employer with notice of it.
The employer may challenge the validity of the lien by filing a complaint in the Circuit Court and the employer or the employee may request an evidentiary hearing within 30 days after receiving a notice. If the court rules against the employer, the employee will be entitled to the lien and to an award of the attorney’s fees. The employer, however, will be entitled to such an award only if the employee’s claim was frivolous or made in bad faith—a showing which is normally impossible to make.
If enforced by the court, the lien becomes a secured claim against the employer’s property and subsequent purchasers are considered to have notice of it. An employee may enforce the lien in the same way judgments are enforced, including by attaching and forcing a sale of the subject property. A lien is valid for 12 years after the recordation date.
The law effectively shifts the responsibility for filing a suit in this area of law.
Before the new law was enacted, an employee had the burden and cost of filing a lawsuit against the employer under the WPCL. As a consequence, the primary effect of the new law is to shift that burden to the employer if it wants to contest the employee’s entitlement to the wages at issue. By doing so, the law will up the ante for an employer who refuses to pay wages rightfully owed in the hope that an employee will not follow through on suing under the WPCL. In that regard, the law may also reduce the caseload of the courts which have had to deal with such lawsuits.