California has fee-shifting provision in place for claimants seeking unpaid minimum wages and unpaid overtime pay, by which the prevailing employee is entitled to attorney’s fees. Many employer defendants have sought to scare away a former employee plaintiff by “reminding” them that if the employee loses, the employer will go after them for their fees and costs. Many employees have considered the risk and opted not to pursue legitimate claims based on that fear.
Effective January 1, 2014, Labor Code § 218.5 will provide that a prevailing employer can recover its defense costs only if it proves to the court that the employee brought the action “in bad faith.” “In bad faith” is not defined in the statute, but it will probably require that the employer prove that the employee knowingly filed a false claim purely withy the intent to harm their former employer.
The history behind the change reveals California’s long-established “pro-employee” position. Governor Brown signed the legislation, SB 462, making this change on August 26, 2013. The bill’s author, Sen. Bill Monning, D-Carmel, stated that this amendment corrects “an historic injustice” and “brings California into conformity with the overwhelming majority of states in the country.
The amendment was prompted by a 2012 California Supreme Court ruling holding that a prevailing employer in a meal-rest penalties case could not recover attorneys’ fees because such penalties are not “wages” and the Labor Code statutes permit fee recovery only in actions involving wages. Kirby v. Immoos Fire Protection, 53 Cal. 4th 1244 (2012).
Although there was no applicable fee-shifting statute in Kirby, the case implied that if the claims had involved wages instead of penalties, an award of attorneys’ fees to the prevailing employer could have been appropriate. The reaction from SB 462′s sponsor — the California Employment Lawyers Association — was to try to protect plaintiff employees from that eventuality by requiring successful employers to prove bad faith. A true win for employee plaintiffs!