BILL ANALYSIS Ó
SB 462
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SENATE THIRD READING
SB 462 (Monning)
As Introduced February 21, 2013
Majority vote
SENATE VOTE :26-9
LABOR & EMPLOYMENT 5-2 JUDICIARY 7-3
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|Ayes:|Roger Hernández, Alejo, |Ayes:|Wieckowski, Alejo, Chau, |
| |Chau, Gomez, Holden | |Dickinson, Garcia, |
| | | |Muratsuchi, Stone |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell, Gorell |Nays:|Wagner, Gorell, |
| | | |Maienschein |
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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.
(Labor Code Section 218.5.)
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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. (Labor Code Section 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,
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 10 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. 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.
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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 the Assembly Labor and Employment 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 (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.
A coalition of employer groups opposes this bill and argues that
it "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."
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0001411
SB 462
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