BILL ANALYSIS Ó
SB 462
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Date of Hearing: June 26, 2013
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
SB 462 (Monning) - As Introduced: February 21, 2013
SENATE VOTE : 26-9
SUBJECT : Employment: compensation.
SUMMARY : Makes the award of attorney's fees and costs where
the prevailing party is not an employee contingent on a finding
by the court that the employee brought the court action in bad
faith. Specifically, this bill :
1)Adds, for purposes of an existing attorney-fee provision under
the Labor Code, if the prevailing party in the court action is
not an employee, attorney's fees and costs shall be awarded
only if the court finds that the employee brought the court
action in bad faith.
2)Clarifies that the existing attorney-fee provision does not
apply to any cause of action for which attorney's fees are
recoverable under Labor Code Section 1194.
EXISTING LAW :
1)Provides that in any action brought for the nonpayment of
wages, fringe benefits, or health and welfare or pension fund
contributions, the court shall award reasonable attorney's
fees and costs to the prevailing party if any party to the
action requests attorney's fees and costs upon the initiation
of the action. This section shall not apply to an action
brought by the Labor Commissioner, to a surety issuing a bond,
as specified, or to an action to enforce a mechanics lien.
(Lab. Code Sec. 218.5.)
2)States that the above provision does not apply to any action
for which attorney's fees are recoverable under Labor Code
Section 1194, which applies to minimum wage and overtime
claims. (Lab. Code Sec. 218.5.)
FISCAL EFFECT : According to the Senate Appropriations
Committee, to the extent the provisions of this bill remove
existing barriers for employees seeking to pursue wage claims,
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this bill would result in potential ongoing increased costs to
the courts for increased civil filings. For every 500
additional limited civil filings (less than ten filings per
county annually), annual costs to the courts are estimated at
$230,000. In addition, 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.
COMMENTS : Existing law, Labor Code section 218.5, provides an
award of attorney's fees and costs to the prevailing party in an
action brought for nonpayment of wages (other than minimum wage
and overtime), fringe benefits, or health and welfare or pension
fund contributions. "Wages" under this statute are defined as
straight-time wages above the minimum wage and contractually
agreed-upon or bargained-for wages." (Earley v. Superior Court
(2000) 79 Cal.App.4th 1420, 1430.) This bill would add to this
provision that a non-employee prevailing party (presumably the
employer) could only be awarded attorney's fees and costs only
if the court finds that the employee brought the court action in
bad faith.
The author argues that existing law is unclear as to the
standard for awarding attorney's fees in these types of actions
since another attorney fee provision (under the Fair Employment
and Housing Act (FEHA)) requires the suit to be objectively
frivolous, unreasonable, or without foundation for an award of
attorney's fees to a defendant employer. The author further
asserts that a recent court case, Kirby v. Immoos Fire
Protection, Inc. (2012) 53 Cal.4th 1244, left open the attorney
fee standard for these types of actions.
In Kirby, the court analyzed whether meal and rest break claims
fell within the scope of nonpayment of other wages under Labor
Code section 218.5 to determine whether the prevailing employer
defendant could be awarded attorney's fees. The Kirby court
found that the claim did not involve Labor Code section 218.5
wages, so the court denied an award of attorney's fees to the
prevailing defendant employer because the two-way fee-shifting
statute did not apply.
History of Fee-Shifting Provisions Under Labor Code Section
218.5
The Legislature reviewed the attorney's fees issue when it
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codified the court's holding in Earley v. Los Angeles County
(2000) 79 Cal.App.4th 1420, which held that the two-way
attorney's fees provision under Labor Code section 218.5 does
not apply to minimum wage and overtime claims brought under
Labor Code section 1194. AB 2509 (Steinberg, Ch. 876, Stats.
2000), among other things, amended Labor Code section 218.5 to
provide that the two-way attorney's fees provisions do not apply
to Labor Code section 1194 wage claims, which only provides a
one-way attorney's fees award in favor of the prevailing
plaintiff. As such, the Legislature reaffirmed its intent to
limit employee attorney-fee liability for minimum wage and
overtime claims, yet it continued the two-way fee shifting
provision for Labor Code section 218.5 claims that had been in
statute since it was enacted in 1986. (See SB 2570 (Lockyer,
Ch. 1211, Stats. 1986).)
Clarification of Attorney's Fee Provision Under Labor Code
Section 1194
Existing law provides that the two-way fee shifting provisions
under Labor Code section 218.5 do not apply to any action for
which attorney's fees are recoverable under Section 1194. This
bill would clarify that these provisions do not apply to any
cause of action for which attorney's fees are recoverable under
Section 1194. In doing so, this bill would codify the court's
holding in Aleman v. Airtouch Cellular (2012) 209 Cal.App.4th
556.
In its reversal of the trial court's determination that both of
the employee's causes of action, one for reporting time and one
for split shift pay, were Labor Code section 218.5 claims, the
Aleman court held that only the reporting time claim was a Labor
Code section 218.5 claim, while the split shift pay claim was a
Labor Code section 1194 claim. (Id. at pp. 582-583.) For
purposes of determining the amount of attorney's fees awardable
to the defendant employer, the court analyzed whether the phrase
"any action" in Labor Code section 218.5 meant "any civil action
in which attorney fees are recoverable under Section 1194, or
whether 'any action' simply means any cause of action." (Id. at
pp. 583-584; emphasis in original.) The court determined that
the Legislature intended to prevent an employee, who files a
Section 1194 claim in the same action as a Section 218.5 claim,
from being unjustly subject to adverse fees awards while another
employee, who files one action for a Section 1194 claim and
separate action for a Section 218.5 claim, would only be subject
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to adverse fees awards on the Section 218.5 claim. Accordingly,
the court held that the phrase "any action" means "any cause of
action." This bill would codify this holding.
Upon passage out of this Committee this bill will be referred to
Assembly Judiciary Committee.
ARGUMENTS IN SUPPORT :
The author writes the following in support of this bill:
"[The Fair] Employment and Housing Act allows for reasonable
attorney's fees to a "prevailing party," (see Cal[.] Gov[.]
Code [Sec.] 12965(b)) but this standard has been interpreted
by the courts to mean that a prevailing defendant can be
awarded attorney's fees only if the suit is objectively
"frivolous, unreasonable or without foundation." (See
Cummings v. Benco Building Services (1992) 11 Cal.App.4th
1383.) No court has directly interpreted the attorney's fees
standard under [Labor Code] section 218.5. In fact, the
question was left open, leading to even more confusion for
courts and workers alike, in a recent California Supreme Court
decision, Kirby v. Immoos Fire Protection, Inc. (2012) 53
Cal.4th 1244, 274.
Not only is this provision anomalous among all other state and
federal wage claim statutes, but it also is one of only two
provisions in the California Labor Code that provides
attorney's fees for a prevailing defendant. Most provisions
of the Labor Code allow only a prevailing employee to recover
attorney's fees.
[This bill] would provide clarification making the award of
attorney's fees and costs where the prevailing party is not an
employee contingent on a finding by the court that the
employee brought the court action in bad faith."
The sponsor, California Employment Lawyers Association (CELA),
further argues that the two-way fee shifting provision in Labor
Code section 218.5 has a chilling effect on contractual wage
claims. Although these claims may be relatively small (as noted
by this Committee when this statute was added to the Labor
Code), CELA asserts that the attorney's fees racked up by
employers as the case goes up and down the court system repels
plaintiffs (and attorneys) from bringing these types of claims
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(that are typically filed with other claims, such as for
overtime, breach of contract, and breach of fiduciary duty).
CELA further asserts that many times, plaintiff attorneys do not
bring claims under Labor Code section 218.5 but instead file
wage claims for minimum wage and overtime because an
unsuccessful plaintiff employee would not be liable for the
defendant employer's attorney's fees.
In support of this bill, the California Labor Federation states
that "California is one of only three states with a 'prevailing
party' standard where a worker may unconditionally be liable for
the employer's attorney's fees in a wage claim action. Given
the realities of wage and hour litigation for a worker, this
rule is unfair. A worker may have a totally legitimate wage
claim, but lack access to the records needed to prove it. In
the underground economy, where workers are often paid 'off the
books' and in cash, records are few and far between and proving
what an employer did or did not do is nearly impossible.
Workers in those kinds of jobs should not be saddled with the
employer's attorney's fees simply because they were not able to
prevail."
ARGUMENTS IN OPPOSITION :
The Construction Employers' Association, in opposition, argues
that "[t]his bill would limit the ability for employers to be
awarded attorney's fees and costs in any action of wages, fringe
benefits or health and welfare or pension fund contributions
unless the court finds that the employee brought the court
action in 'bad faith.' As you know, the 'bad faith' standard is
very subjective and this measure would make it exceedingly
difficult for employers to collect attorney's fees in all but
the most egregious court actions. This will likely prompt a
flood of costly new litigation because the potential downside
for employees is so low."
CSAC Excess Insurance Authority also asserts that"[i]f an
employer is successful in their efforts to defend against an
action, they should equally be entitled to seek recovery of
reasonable attorney's fees and costs without first having to
satisfy an additional burden of whether an action was in bad
faith. Not only does this take away the equal right to
employers, but it also desensitizes plaintiffs and their counsel
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from adequately considering the merits of the intended action
prior to filing."
A coalition of opposition argues that this bill "undermines the
Supreme Court and the clear language of the Labor Code that has
been in place since 1986, in order to provide a one-sided
attorney fee provision that will incentivize further meritless
wage and hour litigation. . . . [Existing law's] two-way
attorney's fee shifting provision was recently affirmed by the
Supreme Court in Kirby v. Immoos Fire Protection, 53 Cal.4th
1244 (2012). SB 462 alters [Labor Code] section 218.5 and the
Court's holding by providing that an employer may only obtain
its attorney's fees if the employer can prove the action was
brought in bad faith. 'Bad faith' is a difficult standard to
prove and will substantially limit an employer's ability to
recover its attorney's fees for defending litigation that lacked
merit. . . . SB 462 disrupts this balance by limiting an
employer's ability to recover its attorney's fees for meritless
claims, which could create more frivolous litigation."
REGISTERED SUPPORT / OPPOSITION :
Support
California Conference Board of Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association (sponsor)
California Federation of Teachers, American Federation of
Teachers
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California Nurses Association
California Rural Legal Assistance Foundation, Inc.
California Teamsters Public Affairs Council
Engineers and Scientists of California, International
Federation of Professional & Technical Engineers Local 20
International Longshore and Warehouse Union
Professional and Technical Engineers, International Federation
of Professional & Technical Engineers Local 21
United Food and Commercial Workers Western States Council
UNITE-HERE
Utility Workers Union of America, Local 132
Wage Justice Center
Opposition
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Acclamation Insurance Management Services
Air Conditioning Trade Association
Allied Managed Care
Associated Builders and Contractors of California
Associated General Contractors
Brea Chamber of Commerce
California Apartment Association
California Chamber of Commerce
California Chapter of American Fence Association
California Fence Contractors' Association
California Framing Contractors Association
California Grocers Association
California Lodging Industry Association
California Manufacturers and Technology Association
California Retailers Association
California Special Districts Association
Camarillo Chamber of Commerce
Construction Employers' Association
CSAC Excess Insurance Authority
Culver City Chamber of Commerce
Engineering Contractors' Association
Flasher Barricade Association
Fullerton Chamber of Commerce
Grater Conejo Valley Chamber of Commerce
Greater Fresno Chamber of Commerce
Marin Builders Association
National Federation of Independent Business
Oxnard Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California
Rancho Cordova Chamber of Commerce
Redondo Beach Chamber of Commerce
Santa Clara Chamber of Commerce and Convention-Visitors Bureau
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Tulare Chamber of Commerce
Valley Industry and Commerce Association
Western Electrical Contractors Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
SB 462
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