In Durand v. HIMC, the plaintiff sued his former employers alleging claims for breach of contract and unpaid wages under Washington state law. Washington law requires that an employer must pay an employee all wages due him or her upon termination, and imposes twice the amount of wages unlawfully withheld (along with attorneys fees and costs) if the employer's failure to pay was "willful." An employer does not willfully withhold wages if there is a bona fide dispute as to the amount owed.
Before trial, the parties jointly submitted settlement negotiation letters in which the employers acknowledged that they owed plaintiff a minimum of $125,000 based on the terms of his employment contract but disputed additional sums above that amount. Although the employers later sought to withdraw this evidence, the trial court admitted the letters and found that the employers willfully withheld $150,000 of plaintiff's contracted wages but that a bona fide dispute existed as to what amounts over that were owed. The Court of Appeal in Washington upheld the admission of the settlement letters. The court noted that while settlement negotiations are inadmissible to "prove liability for or invalidity of the claim or its amount," they are admissible to prove other matters, including mental state, especially when the settlement offeror submits the evidence. The court concluded that the trial court properly considered the settlement letters to determine the employers' mental state regarding how much of the money owed from the underlying contract was subject to a bona fide dispute, and thus, whether the employers willfully withheld wages.
This case serves as a stark reminder to employers to exercise the utmost care during settlement negotiations when communicating with plaintiffs regarding potential legal liability.