California Court of Appeal Holds Attorney's Fees Awards In Wage And Hour Cases Belong To Attorneys Not Clients

In Henry Lee Law Corp. v. Superior Court, the California Court of Appeal held that attorney's fee awards made in wage and hour cases under Labor Code section 1194(a) and 226(e), which provide for an award of attorney's fees to the prevailing employee belong to the employee's attorney and not to the employee even though both statutes expressly state it is the employee who is entitled to recover attorney's fees when an employer fails to pay minimum wages or overtime compensation or fails to provide to the employee a wage statement that complies with all of the requirements of Labor Code section 226(a).

In the trial court, Ok Song Chang, represented by attorney Henry M. Lee, obtained a judgment against A-Ju Tours for $30,150 in unpaid minimum wages, $1,920.00 in "waiting time" penalties, a $4,000.00 penalty for failure to provide compliant wage statements, $15,075 in liquidated damages, and $11,101.74 for prejudgment interest for a total damages award of $62,246.74. The trial court also awarded Chang $300,000 in "reasonable attorney fees."

After Lee obtained on behalf of Chang the $62,246.75 damages award and the $300,000 attorney's fees award and before either award was paid, Chang dismissed Lee as her attorney and filed in the court a substitution of attorney form substituting herself as her own attorney in place of Lee.

Lee then filed an ex parte application seeking leave to intervene in the action and seeking an amendment of the post judgment order to make the attorney's fees award payable to him.

The trial court denied Lee's motion, ruling that Labor Code sections 1194(a) and 226(e) both unambiguously provide for an attorney's fees award to the employee.

On Appeal, the Court of Appeal held the term "employee" is "ambiguous" as used in Labor Code sections 1194(a) and 226(e) and concluded the Legislature intended such awards to be paid to plaintiff employee's attorneys rather than to the employees as stated in Labor Code section 1194(a) and 226(e) and concluded that public policy supports such an interpretation in that it is the public policy of this state to encourage attorneys to prosecute wage and hour lawsuits and to ensure that plaintiff's attorneys are paid when they do so successfully.  In so holding, the Court of Appeal followed and adopted the reasoning of the California Supreme Court in Flannery v. Prentice (2001) 26 Cal.4th 572, in which the Supreme Court similarly ruled that attorney's fees awards made under Government Code section 12965(b) for violations of the California Fair Employment and Housing Act belong to the plaintiff's attorney and not to the plaintiff even though Government Code section 12965(b) expressly states such attorney's fees awards are to be awarded "to the prevailing party."

This case presents two important takeaways for California employers. First, attorney's fees awards for wage and hour violations often greatly exceed the allegedly unpaid wages recovered by the employee. Second, California courts do not always construe statutes using the plain, ordinary meaning of words used in statutes applicable to California employers.

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