The Benefits of Early Mediation of Wage Disputes Between Employees and Owners of Residential Care Facilities for the Elderly (RCFE)

Mae Villanueva

Dec 2022

A majority of residential care facilities for the elderly (RCFE) in California are owned by small business owners. The services they provide are invaluable to our aging population and their families. The caregivers who work alongside RCFE owners are also integral to providing these services to the elderly. However, the cost of doing business can be put to the test when RCFEs become entangled in wage and hour claims brought by their employees. Wage and hour lawsuits can cause irreparable harm to RCFE businesses sometimes causing businesses to file for bankruptcy or close down. Employees whose wage and hour rights are violated suffer great financial hardship too. Wage loss affects many essential workers disproportionately. The Wage and Hour Division is historically finding more violations in low-wage industries than in other economic sectors. The wage disparity is further compounded when caregivers have to wait years before their case can be adjudicated to receive payment. This is why mediation can be an ideal way for RCFE owners and employees to resolve wage and hour disputes.

The Potential Impact of Wage and Hour Violations on RCFEs

On October 20, 2021, the California Labor Commissioner’s citation of $8.5 million to the owner of six residential care facilities was upheld. A hearing upheld the Labor Commissioner’s wage theft citations issued to Adat Shalom Board & Care, Inc. and owner Angelica Reingold in 2018. The citations were to compensate 148 workers who cared for elderly residents 24 hours a day, six days a week, yet were only paid for six hours each day. Reingold, who owns six facilities in Los Angeles, appealed the citations and after a 17-day hearing, the unpaid wages and penalties were upheld with some modifications. Adat Shalom Board & Care, Inc. owes more than $8.5 million for the violations, with $8,356,018 payable to the workers in unpaid wages, overtime, meal period pay, liquidated damages, and interest. 

Why Employers Should Consider Early Mediation

According to a 2021 fiscal report from the Bureau of Field Enforcement report,  “Prior to June 2020, the U.S. Department of Labor’s Wage and Hour Division,… had successfully leveraged pre-litigation liquidated damages in the settlement of cases in lieu of litigation, with impactful results. From the fiscal year 2016 through the fiscal year 2020, the division assessed more than $200 million dollars in liquidated damages for approximately 250,000 affected workers.” Liquidated damages are often higher than the actual amount owed to the employee. Which is why engaging in early mediation before the dispute escalates to litigation can be an effective way to avoid accruing statutory penalties including liquidated damages, waiting time penalties, interests, and both parties attorney’s fees and costs.

Why Employees Should Consider Early Mediation

There are also advantages for employees to mediate their wage claims. According to the Division of Labor Standards Enforcement (DLSE), “The benefit to accepting a settlement offer is that the claim is resolved quickly and your employer agrees to pay you the amount agreed upon. If you do not settle your claim, there is a possibility that your employer could file for bankruptcy or close before you receive any payments. You may be offered less than the wages and penalties owed. If you receive a settlement offer that you believe is too low, you can try to negotiate for a more acceptable settlement amount.” Even if the employee wins their case it does not guarantee payment. In some cases, RCFE owners cannot afford to pay the judgment so they file for bankruptcy or avoid making payment. When this happens the employee has no choice but to go through the collection process which can take years to navigate. Consider weighing the pros and cons of participating in early mediation before going to trial.

Wage and hour disputes do not have to go through a long drawn-out process to be resolved. If both sides are willing to mediate their dispute and compromise on a resolution it can be done.