In Henry M. Lee Law Corp. v. Superior Court, 2012 DJDAR 4763 (2012), the California Court of Appeal for the Second Appellate District decided a novel case arising out of wage and overtime litigation brought under Labor Code Sections 1194(a) and 226(e). The potential for recovery of fees in employment cases can be a significant factor in evaluating liability and can drive settlement. The unique question presented by this case was whether the client or the attorney was entitled to the fee award.

The plaintiff filed suit against a tour company. The plaintiff was represented by counsel. The complaint alleged causes of action for wage and hour violations as well as for alleged wrongful termination. The jury awarded the plaintiff $62,246.74 in compensatory damages as well as $300,000 in attorney fees under Labor Code Sections 1194(a) and 226(e).

The trial court stayed enforcement of the fee award in part to determine whether the undertaking (bond) posted by the tour company to pursue an appeal was sufficient. Soon thereafter, the plaintiff filed a substitution of attorney form in the trial court. She substituted herself in as counsel of record for her prior retained counsel. Later, the same lawyer, purportedly to act on behalf of her client, filed an ex parte application to vacate the stay of enforcement of the attorney fee award. Clearly, what was shaping up was a battle over entitlement to the significant sum of attorney fees awarded by the trial court.

The trial court denied the application to vacate the stay. The court based the decision on the fact that the lawyer was no longer “counsel of record” for the plaintiff. Counsel then filed an ex parte application seeking leave to intervene in the action. The trial court denied the motion to intervene.

The former counsel of record then filed a writ seeking to overturn the trial court’s denial of the petition to intervene. The court of appeal reversed the trial court’s decision, noting that under Labor Code Section 1194, any employee who receives less than the legal minimum wage or overtime compensation to which the employee may be entitled can pursue the unpaid sums in a lawsuit.

The court of appeal also cited Labor Code Section 226(e). That statute states that an employee who is injured by an employer’s failure to timely provide accurate wage statements is entitled to recover a penalty and attorney fees.

The court of appeal relied on Flannery v. Prentice, 26 Cal. 4th 572 (2001), which held that in California Fair Employment and Housing Act (FEHA) cases, the fee award “to the party” goes to counsel absent a specific contract to the contrary. Thus, absent a contract determining a different disposition of an attorney fee award, attorney fees awarded under the statutes is payable to the attorney, not the client.