On August 26, 2013, Governor Jerry Brown signed Senate Bill 462 which amended California Labor Code Section 218.5. In order for an employer to a wage and hour lawsuit be allowed to recover attorney’s fees and costs as the prevailing party, the legislative amendment requires the court find that the employee brought the action in “bad faith”.
The Legislature intended Senate Bill 462 to clarify previous case law which suggested that if attorney’s fees and costs are sought in a case for recovery of wages, the employer may recover their defense costs from Plaintiff. In the case of Kirby v. Immoos Fire Protection, Inc., the court analyzed Labor Code section 1194, a one-way fee-shifting statute which provides attorney’s fees to a prevailing employee in an action for outstanding minimum wages or overtime pay. The court found that meal and rest period premium pay were not “wages” within the meaning of the statute, and held the prevailing employer could not recover their attorney’s fees under 1194.
Next, the court in Kirby analyzed Labor Code Section 218.5(a), a two-way fee-shifting provision which at the time provided “in any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action.” Again, the court found that one hour meal and rest period premiums were not “wages” within in the meaning of the statute, but indicated that had Defendant been the prevailing party on a true claim for unpaid wages, the employer could recover their fees as the prevailing party. The Legislature felt this left the issue open and uncertain, and therefore passed Senate Bill 462 amending Labor Code section 218.5 to require bad faith on the part of the employee before an employer could recover attorney’s fees.
Labor Code section 218.5(a) as amended, now provides in pertinent part, “if the prevailing party in the court action is not an employee, attorney’s fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.” Section 218.5(b) further clarifies “this section does not apply to any cause of action for which attorney’s fees are recoverable under Section 1194.”
While Labor Code section 218.5 is still a two-way fee-shifting statute, it creates an additional burden on employers in collecting their attorney’s fees as the prevailing party. As a result of Senate Bill 462, employers will find it much harder to recover their legal defense expenses associated with unfounded wage and hour claims brought by employees, by requiring employers to go one step further and prove bad faith on behalf of the employee.
To read Senate Bill 462, click here:
Senate Bill No. 462