Often the threat of the
plaintiff’s potential ability to recover attorney’s fees is greater than the
actual damages that they can prove. This can be frustrating for employers
defending wage and hour claims, in both the individual and class action context.
Indeed, an employer must understand the potential damages and exposure of
fees they may have to pay if a case proceeds to trial or arbitration, as well
as the potential to recover fees against the plaintiff. This Friday’s
Five addresses common attorney’s fees issues facing employers in wage and hour
litigation.
1. When are attorney’s fees
recoverable in wage and hour cases? And can a defendant recover fees if
they prevail?
Attorney’s fees in
wage-and-hour cases are covered by two sections of the Labor Code:
sections 218.5 and 1194. Aleman v.
AirTouch Cell., 209 Cal. App. 4th 556, 579 (2012). “Sections
218.5 and 1194 cover similar, though functionally exclusive subjects.” Id. Section 218.5 covers,
among other things, claims “for the nonpayment of wages,” except those claims
subject to Section 1194. Section 1194, in turn, covers claims for failure
to pay minimum wage or overtime. Fees are assessed on a claim-by-claim
basis. Id. at 584.
Section 218.5 allows for
“two-way” fee shifting – i.e.,
to the prevailing party, whether employee or employer – while Section 1194 only
permits a prevailing employee to recover fees. Kirby v. Immoos Fire Protection, Inc.,
53 Cal.4th 1244, 1248 (2012). For an employer to recover fees under
Section 218.5, the claim must have been made in “bad faith.” Cal. Lab.
Code § 218.5(a).
2. Attorney’s fees are
not available to plaintiff for prevailing on missed meal or rest break claims.
In Kirby, the California Supreme Court
considered the issue of whether a can a party recover fees and costs under
Labor Code, section 218.5 or 1194 when it prevails only on a claim for
meal or rest break premium pay. The court determined
that neither of these sections allow for fees, and neither party can recover
fees based on a claim only for premium pay. Id. at 1251-59.
First, the court held that by its
plain terms, section 1194 applies only to claims within the usual meaning of
minimum wage and overtime – i.e.,
failure to pay the minimum wage or overtime compensation set by statute. Id. at 1251-55.
Second, the court found section
218.5 inapplicable because it only applies to claims for “nonpayment of
wages.” Id. at 1255-57. The court noted that
the basis of a section 226.7 claim is the failure to provide meal or rest
breaks, rather than the non-payment of wages. Id. at 1256-57 (“Nonpayment of wages is
not the gravamen of a 226.7 violation. Instead . . . section 226.7
defines a legal violation solely by reference to an employer’s obligation to
provide meal and rest breaks.”) Accordingly, while premium pay owed for
missed meal or rest breaks is measured in terms of an hour’s pay, and deemed a
“wage” for other purposes (such as the statute of limitations) this is only the
statutory remedy. Id.
The injury is not a failure to provide premium pay, but the failure to provide
breaks, and therefore a prevailing plaintiff is not entitled to attorney’s fees
under these provisions.
3. An employee cannot recover
attorney’s fees for successfully winning waiting time penalties under Labor
Code section 203.
In Ling v. P.F. Chang’s China Bistro, Inc.,
245 Cal. App. 4th 1242, 1260-61 (2016), the court considered the issue where a
plaintiff arbitrated her claims before JAMS and the arbitrator rejected plaintiffs’
primary theory of misclassification. Id. at 1248-49. Instead, the
arbitrator awarded plaintiff $1,038 in break premium for her nine-week training
period, which “received little attention at the hearing,” was raised by
plaintiff only in post-hearing briefing, and where it was largely undisputed
that the plaintiff was entitled to breaks. Id. at 1248. The arbitrator awarded
$7,688 in waiting time
penalties under section 203. Id.
Among many other issues on
appeal, the plaintiff claimed that the arbitrator erred in failing to award her
attorneys fees on her successful claim under Labor Code section 203. The
Court of Appeal disagreed. It noted that employee could not “transmute” a
claim for missed breaks into one for unpaid wages by bringing a derivative
claim for waiting time penalties. Id. at 1261. Just as under Kirby, while waiting time penalties
are measured in wages, those penalties are—as Section 203 states
expressly—“penalties” and not wages.
Accordingly, the court found that
waiting time penalties should not have been awarded. Id. More importantly,
however, the court further concluded that no fees could be awarded, because the
waiting time claim was “purely derivative” of a claim for meal break premium
pay. Because the underlying claim did not involve a failure to pay earned
wages, the court held that the waiting time claim did not either, so could not
support a claim for fees on either side.
(Id. [“Because a section 203 claim is
purely derivative of ‘an action for the wages from which the penalties arise,’
it cannot be the basis of a fee award when the underlying claim is not an
action for wages.”])
4. Which party is entitled to
fees is the verdict a split decision and the plaintiff does not win all of
their claims?
Where neither party secures a
“complete, unqualified victory” on all claims, “it is within the discretion of
the trial court to determine which party prevailed . . . or whether, on
balance, neither party prevailed sufficiently to justify an award of attorney
fees.” (See Scott Co. of California v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.)
In exercising this discretion, the court is to “compare the relief awarded . .
. with the parties’ demands on those same claims and their litigation
objectives as disclosed by the pleadings, trial briefs, opening statements, and
similar sources.” (Hsu v. Abbara (1995) 9 Cal. 4th 863, 876.)
This rule applies where both parties effectively win on some claims but not
others, including the Labor Code context. (On-Line Power, Inc. v. Mazur (2007) 149 Cal.App.4th 1079, 1087
[noting that where plaintiff brought action for breach of contract and Labor
Code violations, and settled for $25,000 pursuant to statutory offer, it was
the type of case where the court had discretion to determine the prevailing
party].)
5. Plaintiff’s attorney’s fees
may be denied if plaintiff recovers less than $25,000 in damages.
When a plaintiff recovers less
than the jurisdictional threshold for limited civil cases, which is set at
$25,000 – the court has discretion to deny fees outright, or to award only
limited fees. (Cal. Civ. Proc. Code § 1033.) This rule applies even
where a statute expressly provides for fee shifting. (See Chavez
v. City of Los Angeles (2010)
47 Cal.4th 970, 986-87 [reversing and upholding trial court’s ruling denying
plaintiff any fees where plaintiff recovered only $11,500 in unlimited civil
case].) Section 1033 applies where “the plaintiff did not bring the
action as a limited civil case and thus did not take advantage of the cost- and
time-saving advantages of limited civil case procedures.” (Id. at p. 982). If a plaintiff only
proves limited damages at trial or in arbitration, this rule can shield
defendants from being liable of potentially hundreds of thousands of dollars
for fees incurred by plaintiff’s counsel.
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