Employees Can Pursue Wage Claims Without Risk of Incurring Employer’s Attorney Fees

8.28.13Until recently, California was one of the few states that allowed employers to collect attorney fees and costs when the employer prevailed in a lawsuit involving many wage and hour violations. Since SB 462 became the law, modifying California Labor Code Section 218.5, employees, especially those with lower wage claims, can now pursue their cases in court without fearing getting stuck with the employer’s attorney fees in the event they lost their cases. The bill, introduced by State Senator Bill Monning, essentially forecloses employers from being able to collect attorney fees in wage and hour disputes should they prevail unless they can demonstrate “that the employee brought the court action in bad faith.”

Labor Code Section 218.5 used to provide a two-way fee-shifting provision for most non-overtime and minimum wage claims. In non-legal terms, that means that attorney’s fees may be recovered by the prevailing party, whether it is the employee or the employer. The exposure for many employees with relatively small claims to be potentially saddled with the employer’s attorney’s fees turned away many employees from raising potentially valid claims because incurring an employer’s claim for attorney fees would be crippling for most employees. Most employment discrimination and wage and hour laws with the stark exception of the previous Labor Code Section 218.5 provide for one-way fee-shifting provisions.

What does SB 462 change? It basically says that employers have to meet a heightened standard (“bad faith” by the employee in bringing the claim) to be able to collect attorney fees should they prevail in a Labor Code Section 218.5 claim. Going forward, employees bringing a 218.5 claims will be subject to a one-way fee-shifting provision, which only allows the employee to collect attorney fees when he or she prevails.

Remember that Labor Code Section 218.5 only deals with wage and hour claims other than minimum wage and overtime claims. Minimum wage and overtime claims are governed by Labor Code Section 1194, which already contained a one-way fee-shifting provision. So now, with the amendments with SB 462, all that is now happening is that Labor Code Section 218.5 is being aligned with the attorney’s fees provisions of Labor Code Section 1194.

If you want to learn the legislative history and the reasons for adopting this bill and changing Labor Code Section 218.5, check out this link.