04.30.2012
California Supreme Court Holds Attorney's Fees Are Not Recoverable Under Labor Code Sections 1194 Or 218.5 For Claims For Meal Or Rest Period Violation Penalties Under Labor Code Section 226.7

Today, in Kirby v. Immoos Fire Protection, Inc., the California Supreme Court put to rest the issue of whether either side--a plaintiff employee or a defendant employer--can be awarded attorney's fees under Labor Code sections 1194 or 218.5 when it prevails on a claim for alleged meal or rest period violation penalties under Labor Code section 226.7. The court held today that neither Labor Code section 1194 nor Labor Code section 218.5 apply to a claim for meal or rest period violation penalties under Labor Code section 226.7. For reasons we explain below, we think this common sense decision is a major victory for California employers, and we think this decision has the potential to dramatically alter the landscape of wage and hour class action litigation in California.

The plaintiff alleged in the trial court a variety of wage and hour violations against his employer and sought to litigate his claims as a class action. After the trial court denied the plaintiff's motion for class certification, the plaintiff, perhaps tellingly, dismissed the action, and the trial court awarded to Immoos attorney's fees under Labor Code section 218.5 based on its determination that Immoos was the prevailing party as to, among other claims, plaintiff's claim that Immoos failed to authorize and permit required rest periods. On appeal, the Court of Appeal affirmed the award of attorney's fees as to plaintiff's rest period claim.

The California Supreme Court granted the plaintiff's petition for review of the Court of Appeal's decision but limiting the scope of its review to the issues of whether the prevailing party attorney's fees provisions of Labor Code Section 1194 or of Labor Code section 218.5 apply to a claim for meal or rest period penalties under Labor Code section 226.7, which states if an employer in any instance fails to authorize and permit a non-exempt employee to take a required 10-minute paid rest period or fails to provide to a non-exempt employee a required 30-minute unpaid meal period, "the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day the meal or rest period is not provided."

Because Labor Code section 1194 is a one-way attorney's fees shifting statute that enables employees but not employers who prevail on claims for unpaid minimum wages or for unpaid overtime compensation to recover also attorney's fees, the plaintiff argued section 1194 applies to claims for meal and rest period violations under Labor Code section 226.7. Section 1194 states, in pertinent part: "Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit."  The court rejected plaintiff's argument that "the required payment for missed meal or rest periods is tantamount to a statutorily prescribed minimum wage." The court explained that "the text and history of [Labor Code section 1194] indicate that the Legislature intended 'the legal minimum wage or the legal overtime compensation' to refer to the ordinary minimum wage and overtime obligations."  Placing the final nail in the coffin of plaintiff's argument, which we have always believed was nonsensical and unfounded, the court stated: "It is thus unsurprising that plaintiffs have been unable to identify a single case since the provision's adoption almost 100 years ago interpreting it to apply to anything other than claims for unpaid minimum wages or, starting in 1961, unpaid overtime compensation."

Because Labor Code section 218.5 is a two-way attorney's fees shifting statute that enables employees and employers who prevail on claims for unpaid wages other than unpaid minimum wages or unpaid overtime compensation to recover attorney's fees, the employer argued that section 218.5 applies to claims for meal and rest period violations under Labor Code section 226.7.  Labor Code section 218.5 states, in pertinent part: "In any action brought for the nonpayment of wages . . . , the court shall award reasonable attorney's fees and costs to the prevailing party. . . ." That argument was rooted in the California Supreme Court's 2007 decision in Murphy v. Kenneth Cole Productions, in which the court held that the penalties recoverable under Labor Code section 226.7 for meal or rest period violations are "a 'wage' for purposes of determining what statute of limitations applies to section 226.7 claims."  The court rejected that argument and stated that aspect of its decision in Murphy does not make the Labor Code section 218.5 applicable because "[t]o say that a section 226.7 remedy is a wage, however, is not to say that the legal violation  triggering the remedy is nonpayment of wages."  Simply put, "a section 226.7 action is brought for the non provision of meal and resp periods, not for the 'nonpayment of wages.'"

Having defended numerous wage and hour class actions, we can safely say wage and hour class action lawsuit nearly always include claims for alleged meal and rest period violations. We think today's decision has the potential to dramatically alter the landscape of class action wage and hour litigation in California.

  • To begin with, pending meal and rest period claims as of today no longer carry the prospect of an attorney's fees award under Labor Code section 1194 or 218.5, which should dramatically reduce the potential exposure of the employers defending those cases.
  • We think meal and rest period cases as of today will be less attractive to the plaintiff's bar on a going forward basis because as of today there is no obvious means to recover attorney's fees for such claims. We may therefore see fewer wage and hour class actions based on alleged meal period and rest period violations being filed in the future.
  • It remains to be seen whether the plaintiff's bar will now devote increased attention to coupling claims for alleged wage and hour violations with claims for penalties under the California Labor Code Private Attorneys General Act of 2004, which permits a prevailing "aggrieved" employee to recover for violations of numerous provisions of the Labor Code, including Labor Code section 226.7, penalties and attorney's fees. Such a strategy might enable the plaintiff's bar to regain some lost ground, but claims under PAGA are subject to a one-year statute of limitations, which means that some claims that might otherwise be brought will be time-barred, and the scope of claims that are not time-barred altogether will be limited to one year.
  • It remains to be seen whether the Legislature will enact legislation to permit attorney's fees to be recovered for claims for meal and/or rest period violations and to effectively negate today's decision. We suspect that lobbying for such action by the Legislature has already begun.

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