1. How likely are you to win v lose? An experienced employment attorney should be able to advise you on your chances of prevailing v losing and what's the most you can lose, so that you know what your risks are. Even though no attorney can know for sure the outcome of a claim, knowing your chances and assessing your exposure risks will help you make the decision about continue to fight v settling.
2. If you win, will this really be a victory for you? How much will it cost you to take the claim all the way through a hearing even if you end up winning. Will you spend more on an attorney than you can settle your claim for today? If so, maybe it's worth considering putting the principle aside for the sake of making the right financial decision and making the claim go away earlier than later.
3. How much of an (emotional) distraction is this? Do you get angry, anxious or stressed out from this process? Does it interfere with your ability to run your business efficiently by taking your time and mind away from what's really important to you now? Is this something you can put to rest relatively inexpensively? If you answer "yes" to these questions, it might be worth settling your claim sooner than later, especially if the amount doesn't justify losing sleep over it.
4. Do you need to send a strong message to other employees? Is it important for you to fight this case to send a message to other employees that you don't settle claims easily in order to discourage them from filing (similar) claims? If so, you might have to continue fighting and even consider filing an appeal if you end up losing at the labor commissioner hearing. If you are not ready for this, this is yet another reason to settle sooner than later.