California Governor Signs Bill Limiting Attorneys’ Fees for Employers in Wage Cases

California Governor Jerry Brown on August 28, 2013, signed into law a measure limiting the ability of employers to obtain attorneys’ fee awards if they are prevailing defendants in wage disputes.

Senate Bill (SB) 462 amends section 218.5 of the California Labor Code to provide that a prevailing employer may only recover attorneys’ fees if a trial court finds that the employee brought the wage action in bad faith.  With this amendment, it will be even more difficult for a prevailing employer to recover attorneys’ fees in wage and hour actions in California. The statute takes effect on January 1, 2014.

SB 462 had been introduced by State Senator Bill Monning, a Democrat from Carmel, following a decision by the California Supreme Court in 2012 in Kirby v. Immoos Fire Protection Inc., (2012). Kirby held that winners in cases over alleged meal and rest break violations were not entitled to attorneys’ fees. Although the supreme court denied an award of attorneys’ fees to the prevailing defendant-employer because a two-way fee-shifting statute did not apply, the ruling left open the potential for the award of such fees for employers in wage claim actions.

SB 462 closed the door on such a potential, and provides that if the prevailing party is not an employee, attorneys’ fees and costs may only be awarded if the court “finds that the employee brought the court action in bad faith.” Such a standard presents a nearly impossible burden for employers to ever satisfy.

What does this mean for employers?

First of all, it slams the door on any realistic opportunity to recover fees against an unsuccessful plaintiff in a case alleging unpaid wages. Second, it is important to note that while it raises the bar for employers to obtain attorneys’ fees where they prevail in such cases, this statute does not apply to minimum wage or overtime claims. Section 1194 of the Labor Code already provides for just a one-way fee-shifting provision, authorizing an award of attorneys’ fees to employees who are successful in proving their overtime and minimum wage claims, but not corresponding attorneys’ fees to successful employers.

As a result, a Labor Code that was already slanted in favor of employees seeking attorneys’ fees became even more slanted in favor of employees.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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