An employer who wins a lawsuit doesn't often recover attorney fees from the employee, but there are some exceptions.
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Court Awards Attorney Fees To Prevailing Employer
In Wage Claim Lawsuit
By Christopher W. Olmsted
Litigation can be a losing proposition even for employers with strong defenses, what with legal fees and other costs. Many employment laws entitle the winning employee to recover fees, but do not provide the same remedy for winning employers. But there are a few exceptions. A recent California appellate court case titled Kirby v. Immoos examined one such exception in the context of a Labor Code claim for wages.
Anthony Kirby and Rick Leech, Jr. sued their employer, Immoos Fire Protection, Inc. for violating various California labor laws as well as the unfair competition law (Cal. Bus. & Prof. Code, § 17200 et seq.). Immoos successfully defended against allegations of labor law violations brought by two former employees. The court subsequently awarded $49,846.05 in attorney's fees to Immoos for its defense of causes of action for failure to pay wages due and failure to provide rest periods. The court awarded fees under Labor Code section 218.5.
So far so good, but the employees appealed. They argued that the employer was not entitled to collect attorney fees, because they had also sued under other Labor Code sections barring employer attorney fees, and those sections, they argued, trumped Section 218.5.
When Can An Employer Recover Attorney Fees?
Generally, a party may recover attorney's fees only when a statute or agreement of the parties provides for fee shifting. Typically in the employment context there are no written agreements calling for attorney fees in the event of a legal dispute. For the most part, attorney fees are awarded in lawsuits involving statutes that provide for an award of fees.
For example, the Fair Employment and Housing Act (FEHA) provides that the prevailing employee may recover attorney fees. The California Labor Code also provides that prevailing employees may recover attorney fees. Labor Code Section 1194 permits the winning employee to recover attorney fees for overtime and minimum wage claims. However, that section does not allow a prevailing employer to recover fees.
For the most part, winning employers don’t recover attorney fees, but there are exceptions. Labor Code Section 218.5 provides for fee shifting in favor of the party that prevails on a claim for unpaid wages and specified benefits. Unlike overtime/minimum wage claims under Section 1194, which allows only employees to recover attorney fees, Section 218.5 allows the winning employee or employer to recover fees.
Immoos relied on Section 218.5 when it applied for recovery of its fees. It argued that the employees had made unsuccessful claims for unpaid wages and rest period penalties, and Section 218.5, rther than 1194 applied.
Attempting to avoid the attorney fees, the employees argued that while their lawsuit sought unpaid wages, it also sought overtime pay. They argued that therefore the attorney fee rules in Section 1194 should cover all claims in the case.
The appellate court rejected the employees’ argument. It ruled that Section 1194 applies only to causes of action for minimum wages and overtime. If an employee loses on a minimum wage or overtime cause of action, the employer cannot recover fees. However, if the employee loses on an unpaid wage or rest period claim, the employer can in fact recover its fees from the employee.
Some accounting was in order to determine exactly how much fees should be awarded to the employer. The employer could not recover its expenses for the time the attorneys spent defending the minimum wage and overtime claims. The attorneys would have to account for the time spent defending the unpaid wage and rest period claim.
Although the case is good news for employers, as a practical matter, employers cannot count on collecting attorney fees from former employees. Many employees are not in a financial position to reimburse the employer for such fees. Nevertheless, few employees want to face the prospect of a judgment lien on property and the black mark on credit. This may be sufficient to dissuade some employees from making unmeritorious wage claims.
Related Articles:
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Download entire August 2010 Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2010 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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