Employer’s right to costs of suit

Are employers entitled to costs of suit in employment discrimination cases?

On May 4, 2015, the California Supreme Court confronted the issue of the appropriate standard for an employer’s right to costs of suit in cases brought under the state’s employment discrimination law (Fair Employment and Housing Act). The court, in Williams v. Chino Valley Independent Fire Dist. (Cal. May 4, 2015) 2015 Cal. LEXIS 2485, concluded that employers may recover costs in such cases only when the employee brought or continued the case without an objective basis for believing it had potential merit.

The court in Williams reached this conclusion after resolving two questions. The first was whether the right to costs is covered by a law that applies to civil cases generally (Code of Civil Procedure section 1032), or by a provision in the Fair Employment and Housing Act. The former provides that prevailing parties are entitled to their costs. The latter, in contrast, gives the court discretion in awarding costs (and attorney fees) to a prevailing party. (Government Code section 12965(b).)

The state’s high court answered this first question by determining whether the Fair Employment and Housing Act provision is an express exception to the general costs law. The court reviewed several other laws, including the federal equivalent of the Fair Employment and Housing Act (Title VII), the federal Americans with Disabilities Act, and the federal Rehabilitation Act. It noted that Title VII and the Rehabilitation Act provide that courts have discretion to award attorney’s fees to prevailing parties, but are silent as to costs. But the Americans with Disabilities Act contains language that courts have such discretion with respect to attorney fees and costs.

The court in Williams turned next to lower state court decisions on the question of costs in Fair Employment and Housing Act cases. A Second District Court of Appeal decision (Cummings v. Benco Building Services (1992) 11 Cal. App. 4th 1383) concluded that courts have discretion when awarding attorney’s fees and costs. Numerous decisions followed adopting this position as to attorney’s fees. But with respect to costs, all published decisions declined to follow Cummings (Perez v. County of Santa Clara Cal. (2003) 111 Cal. App. 4th 671; Knight v. Hayward Unified School Dist. (2005) 132 Cal. App. 4th 121; Hatai v. Department of Transportation (2013) 214 Cal. App. 4th 1287).

Nevertheless, the state’s high court determined that the Fair Employment and Housing Act provision giving courts discretion as to attorney’s fees and costs is an express exception to the general costs law. It relied on the language in the provision, along with the Americans with Disabilities Act language, which is more similar to the Fair Employment and Housing Act as compared to Title VII or the Rehabilitation Act.

The second question was whether the language authorizing court discretion for awarding costs applies equally or “asymmetrically” to employees and employers. The Fair Employment and Housing Act provision does not distinguish between employees and employers. But the court in Williams also looked to the legislative history of the Act to answer the question.

A bill concerning a predecessor law to the Fair Employment and Housing Act would have allowed awards of costs and attorney’s fees to prevailing employees only. A committee considering the bill was informed that federal law (Title VII) allowed awards to prevailing employers as well, but only where the cases were frivolous. The Legislature amended the bill to allow awards to prevailing parties. Before the bill became law, the U.S. Supreme Court decided that awards of attorney’s fees in Title VII cases to employers were available only when the cases were frivolous, unreasonable, or groundless. (Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412.) The state’s high court concluded that the Legislature intended that the court discretion be applied in the same manner as announced in the U.S. Supreme Court decision. At the same time, the Legislature also intended that this discretion apply not only to attorney’s fees, but to costs as well, given the express inclusion of both in the provision.

The court in Williams determined that such asymmetrical application of court discretion is consistent with the policy behind the Fair Employment and Housing Act. The policy is to encourage people harmed by discrimination to seek relief in the courts. While attorney’s fees can be substantially more than costs, the latter can sometimes be significant. Awards of costs for tens of thousands of dollars would discourage employees with meritorious cases to file cases given that many of these employees have experienced some period of unemployment.

The California Supreme Court decided that a prevailing employee should ordinarily receive her costs and attorney’s fees unless special circumstances would make the award unjust; and that a prevailing employer should not be awarded fees and costs unless the court finds the action was objectively without foundation when brought, or the employee continued to pursue the case after it clearly became so. This decision will undoubtedly change how employees and employers weigh their respective risks in employment discrimination cases.

Posted by deanroyerlaw