BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 462 (Monning) - Employment: compensation.
Amended: April 15, 2013 Policy Vote: Judiciary 5-2
Urgency: No Mandate: No
Hearing Date: May 6, 2013 Consultant: Jolie Onodera
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 462 would revise the existing two-way fee
shifting provision under Labor Code § 218.5, where either party
is authorized by statute to an award of attorney's fees and
costs, and provide that the non-employee prevailing party (the
defendant employer) could only be awarded attorney's fees and
costs upon a judicial finding that the employee brought the
action in bad faith.
Fiscal Impact:
To the extent the provisions of this bill remove existing
barriers for employees seeking to pursue wage claims,
potential ongoing increased costs to the courts for increased
civil filings. For every 500 additional limited civil filings
(less than 10 filings per county annually), annual costs to
the courts are estimated at $230,000 (General Fund*).
To the extent a state agency acts as employer, there could be
potential future lost recovery of attorneys' fees and costs
that a state agency otherwise could have been awarded. Given
the vast range of attorney's fees and costs specific to any
one case, the potential impact of a single suit in which a
state agency is the prevailing party could range from minor to
very substantial.
*Trial Court Trust Fund
Background: Under current law, when an employee files an action
to recover minimum wages or overtime, the employee who prevails
in the action is entitled to recover reasonable attorney's fees
and costs of the suit. (LC § 1194) Alternatively, if an employee
files an action to recover wages, fringe benefits, or health and
welfare or pension fund contributions, the court is required to
award reasonable attorney's fees and costs to the prevailing
party, as specified. (LC § 218.5.) "Wages" under this statute
are defined as straight-time wages above the minimum wage and
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contractually agreed-upon or bargained-for wages."
Proposed Law: This bill would revise the existing two-way fee
shifting provision under LC § 218.5, where either party is
authorized by statute to an award of attorney's fees and costs,
and provide that the non-employee prevailing party (likely the
defendant employer) could only be awarded attorney's fees and
costs upon a judicial finding that the employee brought the
action in bad faith.
Related Legislation: AB 2509 (Steinberg) Chapter 876/2000
revised statutes relating to the administrative and civil
enforcement of wage and hour laws including wage collection and
enforcement procedures before the Labor Commissioner. Provided
that the two-way attorney's fees provisions do not apply to
minimum wage and overtime wage claims under LC § 1194.
SB 2570 (Lockyer) Chapter 1211/1986, among other things,
established the two-way fee shifting provision in LC § 218.5.
Staff Comments: The proposed amendment to LC § 218.5 would
change the two-way prevailing party attorney's fees provision
for actions involving straight time wages above the minimum wage
and contractually agreed-upon or bargained for wages, such that
an employer would only be awarded attorney's fees as a
prevailing party upon on a finding that the employee brought the
action in bad faith. This does not apply to minimum wage and
overtime claims which are subject to a separate one-way attorney
fee provision under LC § 1194.
Local governmental employers would be exempt from this proposed
change to statute, as LC § 220 provides, as follows:
"220. (a) Sections 201.3, 201.5, 201.7, 203.1, 203.5, 204,
204a, 204b, 204c, 204.1, 205, and 205.5 do not apply to the
payment of wages of employees directly employed by the
State of California. Except as provided in subdivision (b),
all other employment is subject to these provisions.
(b) Sections 200 to 211, inclusive, and Sections 215
to 219, inclusive, do not apply to the payment of wages of
employees directly employed by any county, incorporated
city, or town or other municipal corporation. All other
employments are subject to these provisions."
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As LC § 220 expressly exempts certain local public employment
from the application of Sections 215 to 219, inclusive, and
specifically subjects all other employments to those provisions,
the application of LC § 218.5 is presumed to include state
employment. In addition, staff notes that AB 2410 (Machado)
Chapter 885/2000 amended LC § 220 to remove an exemption for the
state that existed at the time. Although the provisions of this
bill could potentially impact state agencies acting as employer,
it is assumed that the Regents of the University of California
would be exempt, as they are constitutionally immune (Goldbaum
v. Regents of the University of California (2011) 191
Cal.App.4th 703)
Because this bill would restrict an employer's award of
attorney's fees if it prevailed in an action for contractually
agreed-upon wages, fringe benefits, or health and welfare or
pension fund contributions, this bill could alter the
contracting parties' agreement on attorney's fees awards and
could create uncertainty for the contracting parties.
To the extent the provisions of this bill affect state agencies
as an employer in actions brought for the nonpayment of wages,
fringe benefits, or health and welfare or pension fund
contributions, it could make it more difficult for the state to
get an award of attorney's fees, resulting in increased costs
(General Fund) to the state. The estimated fiscal impact would
be dependent upon the frequency of suits in which state
employers have been involved for the nonpayment of wages, have
prevailed in such actions, and have pursued awards of attorney's
fees. At the time of this analysis, it was undetermined how many
suits involving the state acting as employer to date would have
been affected under the provisions of this bill. Given the range
of attorney's fees and costs unique to any one case, the
potential impact of a single suit in which the state agency was
the prevailing party could range from minor to very substantial.
Although claims filed under LC under LC § 1194 for minimum wage
and overtime costs are provided a one-way fee-shifting award to
the prevailing plaintiff, a recent court decision in Plancich v.
United Parcel Service, Inc. (2011) 198 Cal.App.4th 308 held that
it does not expressly exclude an award of defendant attorney's
fees. The court cited Code of Civil Procedure § 1032, which
requires express statutory language exempting a prevailing party
from recovering costs. Because LC § 1194 has no express
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exemption against an award of attorney's fees to a prevailing
defendant, the court awarded the defendant its attorney's fees
and costs.
Of note from the Senate Judiciary Committee analysis of this
measure: "As asserted by CELA [California Employment Lawyers
Association], plaintiff attorneys primarily limit their wage
claims to LC § 1194, rather than claiming LC § 218.5 claims due
to the two-way fee shifting liability. In light of the Plancich
two-way fee-shifting holding, this bill may encourage plaintiff
attorneys to file all wage claims under LC § 218.5 in order to
avoid a potential award of attorney's fees to the defendant. In
this regard, this bill would expressly limit the defendant's
attorney's fees to only those prevailing employers who prove the
plaintiff's bad faith in bringing the claim."
To the extent the provisions of this bill result in an increase
in court filings due to the removal of existing barriers for
employees to pursue wage claims, there would be an impact to
existing court workload. For every 500 additional limited civil
filings (less than 10 filings per county annually) resulting
from the provisions of this bill, annual costs to the courts are
estimated at $230,000.