Under the “American” rule, each side to litigation–and this includes typical employment cases with two exceptions we’ll cover below–pays their own attorney fees. An exception of course would be suing for breach of a written contract which provides for attorney fees to the prevailing party. Also, in Government Code cases in California, where age, sex, race, national origin, physical or mental condition discrimination is alleged, the law provides for the employee to receive attorney fees, unless the case is lost by the employee and found to be frivolous.
On the Labor Code side, such as with wage and hour claims, the rules are a bit different. California Labor Code 218.5 provides that the court shall award attorney fees to either prevailing party. Until now, this has required a major strategy call by our clients and ourselves as to whether to seek attorney fees under this provision. That is so since fees to the employer are “mandatory” if they win the Labor Code claims.
Now, the state has passed and enacted Senate Bill 462, which amends 218.5’s ability to allow the employer to win attorney fees. Starting 1/1/14, defendants will be entitled to attorney fees only if the court finds that the employee brought the lawsuit in bad faith. This change now equalizes and reconciles this section with other fee-shifting laws. As an example, in minimum wages (or overtime (LC Section 1194) only prevailing employees can get attorney fees and costs of suit. This is also true for missed meal and rest breaks (LC 226.7). Under the Private Attorney General Act (LC 2699, PAGA), basically a waiting-time penalty law, only the prevailing employee may seek fees.
This new law may affect the right of employers to even get reimbursed for court costs (through a document called “Memorandum of Costs”) under Code of Civil Procedure Section 1032. Costs are usually awarded “except as otherwise expressly provided by statute.” So does this new statute limit the right of employers to seek costs? This may well change the result of a recent case, Placich vs. United Parcel Service, Inc., 198 Cal App 4th 308 (2011), which ruled in favor of an employer’s cost bill because Section 1194 (minimum wage and overtime claims) does not expressly exclude an award of attorney fees to the defendant.
In many of our cases, attorney fees can far exceed the recovery due our clients. As such, this is an important area, especially if those equally-high defense fees are awarded against our clients. We applaud this new development and will be relying more heavily on LC 218.5 after the first of the year.