BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 462
                                                                  Page  1


          SENATE THIRD READING
          SB 462 (Monning)
          As Introduced  February 21, 2013
          Majority vote 

           SENATE VOTE  :26-9  
           
           LABOR & EMPLOYMENT         5-2  JUDICIARY           7-3         
           
           ----------------------------------------------------------------- 
          |Ayes:|Roger Hernández, Alejo,   |Ayes:|Wieckowski, Alejo, Chau,  |
          |     |Chau, Gomez, Holden       |     |Dickinson, Garcia,        |
          |     |                          |     |Muratsuchi, Stone         |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Morrell, Gorell           |Nays:|Wagner, Gorell,           |
          |     |                          |     |Maienschein               |
           ----------------------------------------------------------------- 
           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.)









                                                                  SB 462
                                                                  Page  2


          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.








                                                                  SB 462
                                                                  Page  3



          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
                                                                  Page  4