BEWARE – legal fees, employees yes, employers no

While the title of this Alert is a slight overstatement, it is not that far from reality. In 2013, SB 462 which was signed into law by Governor Brown, serves to amend Labor Code Section 218.5.  That section used to permit a court to award attorney fees to the prevailing party, regardless of whether it was the employee or employer.  The law now states that an employer that prevails must show that the employee’s claim(s) lack(s) merit before any award of fees to the employer will be awarded. The same is not true for an employee to be given attorney fees; rather, they must simply prevail. The change serves to clarify a ruling by the California Supreme Court in the matter of Kirby et al. v Immoos Fire Protection Inc.  In that case, Kirby alleged unpaid rest and meal breaks.  The court ruled that the requested compensation did not fall under the wages covered by Section 218.5 so the prevailing employer could not receive an award of fees and costs.  Despite the conclusion by the court that the employer could not get fees and costs in that case, it maintained that fees can be awarded to the prevailing party whether it is the employee or employer. SB 462’s sponsor claimed that allowing both parties equal rights to fees and costs placed a heavier burden on employees in contractual wage claims and as such was unfair.  Because employer’s defense costs were likely to be higher than that of the plaintiff(s), simply permitting the victorious party fees would dissuade plaintiffs from bringing suits.  As a result, employers must now demonstrate “bad faith” in order to be awarded attorney fees and costs.