The California Legislature recently passed, and the Governor enacted, Senate Bill 462 by Senator Bill Monning (D-Carmel) which disrupts the two-way street of fee shifting in wage and hour litigation.
SB 462 amends section 218.5 of the California Labor Code to preclude an employer from asking a court to award its reasonable attorneyâ€™s fees when it prevails in a lawsuit over the nonpayment of wages unless the court finds that the employee filed the lawsuit in bad faith.
The traditional â€œAmerican Ruleâ€ when it comes to the payment of attorneyâ€™s fees is that parties to litigation typically pay their own attorneyâ€™s fees â€” it doesnâ€™t matter who wins or who loses. This rule can be changed by contract or a provision of law.
Prior to the enactment of SB 462, the prevailing party in a wage and hour dispute was able to petition the court for an award of its attorneys fees on equal footing. With the enactment of SB 462, a prevailing employer may only ask for attorneyâ€™s fees if it can prove that an employee brought the wage and hour claim in â€œbad faith.â€
SB 462 is unfair to business owners because it applies a different standard to the award of attorneyâ€™s fees depending on who asking: the standard is lower for employees, and the burden for a prevailing employer is much higher. What exactly constitutes â€œbad faithâ€ is not defined in the legislation.
An award for attorneyâ€™s fees in a wage & hour dispute can often be many multiples more than the underlying damages. This has provided plaintiffsâ€™ attorneys with a real incentive to bring numerous wage and hour claims to California courts because the attorney can make out like a bandit even if they only win $1 in court for their client.
Now that plaintiffs and their attorneys know that they will not likely be stuck paying a large attorneysâ€™ fee award to a prevailing employer, they can bring even more meritless claims into California courts.
SB 462 will take effect January 1, 2014.
Please contact my office if you have any questions about SB 462 or wage and hour litigation. I can be reached at (916) 333-2222.