During the most recent legislative session, the Maryland General Assembly enacted legislation that creates an entirely new procedure by which employees who believe they are due unpaid wages can seek to obtain a lien against their employer for the wage amount. Most significantly, the procedure allows for the entry of a lien prior to a full adjudication in which the employee is obligated to demonstrate the merits of the wage claim. This article examines the new statute, which takes effect October 1, 2013.
Maryland has long had in place statutes pursuant to which employees may pursue a legal claim for unpaid wages. Such claims are generally filed pursuant to the Maryland Wage Payment and Collection Law (MWPCL) or the Maryland Wage-Hour Law (MWHL). Lawsuits filed under either the MWPCL or the MWHL proceed in the same procedural manner as any other civil claim, with the plaintiff having the burden to prove his or her claim at trial before the entry of any court order compelling payment by the employer.
In the 2013 legislative session, the Maryland General Assembly enacted a law which may dramatically affect the manner in which claims for unpaid wages are pursued. House Bill 1130, which was signed by Governor 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 pursuant to which an employee wishing to pursue a claim for unpaid wages may obtain a lien for the amounts claimed prior to initiating any civil action, such as a 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 form of the notice to be specified by regulations issued by the Department of Labor, Licensing & Regulation. As of the publication of this newsletter, no regulations have been issued. The level of detail that will be required as part of a notice under the statute therefore remains unknown.
Once notice is served, the statute shifts the burden to the employer to initiate judicial action contesting the claim. The statute specifies that the employer’s filing must contain a statement of defenses concerning the wage amount claimed, accompanied by an affidavit supporting the employer’s position. If the employer fails to file a complaint in court within 30 days after receiving the notice, a lien automatically arises in accordance with the terms set forth in the notice prepared by the employee.
If the employer does file the necessary pleadings to dispute the lien, the statute directs the court to decide within forty-five days whether the employee is entitled to the lien. If the court does find that a lien is appropriate under the statute, the employee is to automatically receive an award of the attorney’s fees he or she incurred in obtaining the lien.
In the event a lien is entered, it can be recorded against the real or personal property of the employer consistent with the terms specified in the lien. The lien would thereafter generally have the same effect as other liens entered in the commercial context.
Takeaway for employers: The lien statute enacted by the General Assembly represents a marked departure from prior Maryland law concerning wage claims. The law creates an attractive opportunity for plaintiffs and their attorneys, in that the lien procedure promises the opportunity of relief within 45 days, as opposed to the much lengthier litigation process that accompanies actions under the MWPCL and the MWHL.
Of greatest concern, the law fundamentally shifts the onus of initiating court action from the employee to the employer, and creates a significant risk that inaction by the employer may waive 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. Where the employer is a corporation or other entity, the possibility exists that the officer or resident agent served may not appreciate the importance of the notice, in which case the employer may waive its right to contest the lien by failing to timely respond. It is therefore critical that employers ensure that the people authorized to accept service on their behalf understand the new law and that the employer be prepared to make an immediate response in the event a notice is received. Immediate action is essential, as once service occurs the clock begins ticking for the employer to initiate court proceedings or be faced with a fiat accompli in which its critical real or personal property is suddenly encumbered with a lien.