What is the Purpose of Sending a Demand Letter Prior to Filing a Lawsuit?
After experiencing unfair treatment or wrongful termination and before filing a lawsuit in court, one of the initial steps an employee might consider in an attempt to resolve a dispute with a current or former employer is to send a written demand for payment which is called as “demand letter.” Understanding the purpose, components and importance of a demand letter can significantly impact the odds of an early resolution (settlement), and sometimes can have an impact on the scope of the subsequent lawsuit.
What is a Demand Letter?
A demand letter is just what it says – a letter from the employee (or more often, the employee’s attorney) to the employer in which the employee asserts legal rights and demands a monetary payment in exchange for an agreement not to sue the employer in court. Although the style, scope and length of demand letters varies widely, a typical demand letter outlines the employee’s grievances/claims against the employer, identifies the specific statutory or other legal basis for the claims, and demands specific actions, such as compensation or other remedies in exchange for an agreement not to sue the employer in court. The demand letter serves as both a notice of the dispute and an opportunity for resolution without litigation.
Key Purposes of a Demand Letter
- Initiating Negotiations
In most cases, the primary purpose of a demand letter is to initiate negotiations between the employee and the employer. The demand letter opens the door for a dialogue aimed at resolving the issue amicably, often avoiding the time, expense, and stress associated with a lawsuit in state or federal court.
- Clarifying the Employee’s Position
The demand letter always should provide a clear and concise summary of the employee’s position, including the nature of the grievance, the legal basis for the claims, and the specific remedies sought. This clarity helps the employer understand the seriousness of the matter and the potential consequences of not addressing it.
- Establishing a Record
Sending a demand letter establishes a record of the employee’s attempts to resolve the dispute. Although a demand letter is not a required prerequisite to a lawsuit under California law, courts tend to have a more favorable view of parties that make good faith efforts to resolve disputes prior to formal legal action in court.
- Demonstrating Seriousness
A well-crafted demand letter, especially one sent by an attorney, signals to the employer that the employee is serious about their claims and prepared to take legal action if necessary. This can motivate the employer to take the matter seriously and consider settlement options.
- Detailing Legal Claims
To be most effective, a demand letter should provide a clear and concise explanation and identification of the statutory or other legal basis for the employee’s claims against the employer. Doing so helps the employer understand the potential legal ramifications of their actions and the strengths of the employee’s case.
- Setting the Stage for Litigation
If the demand letter does not result in a satisfactory resolution, it sets the stage for litigation. The letter can outline the specific issues that will be brought before the court, providing a roadmap for the legal proceedings.
Components of an Effective Demand Letter
- Factual Background
The letter should start with a clear and detailed description of the events leading to the grievance. This includes dates, times, locations, and any relevant interactions. Keep in mind that to be most effective, a demand letter needs to be read by the employer and the employer’s attorney. If the employee includes too many details, irrelevant details, or a narrative that is 10 miles long, no one is going to read the letter and the employee’s demands will be ignored. Mark Twain commented on this concept when he remarked to a friend that he “would have written a shorter letter, but he did not have time.”
An effective argument needs to be well organized, focused and precise, not rambling and full of emotions. Matt Ruggles recommends that the factual portion of the demand letter should be closer to a police report than an Agatha Chrisie novel – just the facts, not a lot of fluff. In most circumstances, that requires the assistance of an experienced employment law attorney. In Matt’s experience, a person that does not understand the technical details of the underlying legal claims cannot draft an effective demand letter because the majority of the facts included by the layperson author are irrelevant to the legal claims. As a result, the legal claims appear weak because the employee simply doesn’t understand how to correctly express the problem.
- Legal Basis
Reference the specific laws, statutes, regulations, or contract provisions that the employee contends the employer violated or otherwise support the employee’s claims. This demonstrates the legitimacy of the grievance and the potential legal consequences for the employer.
- Demands
Clearly state what the employee is seeking, whether it is monetary compensation, reinstatement, or other remedies. Be specific about the amounts or actions required to resolve the issue. Most people that have never sent a demand letter make an unrealistic and unreasonable initial demand for payment in the demand letter, assuming that asking for millions of dollars will frighten the employer into submission.
In fact, making an unreasonable demand has the opposite effect and forces the employer to hire outside legal counsel to defend against a perceived frivolous, unreasonable and vexatious former employee. Think of it this way – if you were selling a used car worth $30,000 and someone offered you $500 for the car, would you continue to negotiate with that person? Of course not! The same concept applies when you ask for millions of dollars for a claim that is worth only five figures. Instead, realize that an early settlement means money in the door now, and therefore will require a more significant compromise compared to someone that spends years fighting the employer in court.
- Deadline
Include a reasonable deadline for the employer to respond to the demands. This creates a sense of urgency and encourages the employer to address the matter promptly. That said, most corporate employers cannot react very quickly, so demanding resolution in a few days or a week is counterproductive. A pre-lawsuit settlement negotiation typically requires at least 30-90 days.
- Consequences
Outline the potential consequences of not meeting the demands, such as the initiation of legal proceedings. This emphasizes the seriousness of the situation and the employee’s preparedness to pursue further action. Expressly tell the employer that you intend to file a lawsuit in the California Superior Court or the United States District Court (whichever is applicable).
Conclusion
A demand letter is a powerful tool in employment disputes, serving multiple purposes from initiating negotiations to establishing a formal record of the employee’s grievances. By clearly outlining the issues, legal basis, and desired remedies, a demand letter sometimes can lead to a satisfactory resolution without the need for litigation. However, if negotiations fail, it provides a solid foundation for pursuing legal action.
For personalized advice and assistance in drafting a demand letter, consider consulting with an experienced employment lawyer who can help you navigate the complexities of your specific situation and maximize your chances of a favorable outcome.
Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit
Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California and federal court. Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.
Contact the Ruggles Law Firm at 916-758-8058 for a free, no obligation consultation.
Blog posts are not legal advice and are for information purposes only. Contact the Ruggles Law Firm for consideration of your individual circumstances.
