Wage and hour attorney’s fees

Attorney’s fees for individual erroneously sued as employer for wage and hour violations?

On June 28, 2016, the Fourth District Court of Appeal decided whether an individual sued for wage and hour violations could recover attorney’s fees on grounds he was found not liable because he was not the employer. In Ramos v. Garcia (2016) 248 Cal.App.4th 778, the appellate court interpreted two California laws that govern attorney’s fees in wage and hour actions.

In this case, Mr. Ramos received an award against two individuals for unpaid overtime and minimum wage compensation, penalties for the waiting time before wages were paid, and for the delay in personnel records provision. Mr. Ramos lost on his claims for meal and rest period compensation against all three defendants.

One of the defendants, Mr. Garcia, prevailed on all of Mr. Ramos’s claims after he was found to be a manager, not an employer. Mr. Garcia sought an award of attorney fees against Mr. Ramos on grounds that he was a prevailing party entitled to fees under California Labor Code section 218.5. Mr. Garcia alleged that Mr. Ramos brought the action in bad faith because it was reasonably clear from the beginning that Mr. Garcia was not a proper defendant in the case. The trial court awarded Mr. Garcia attorney fees, determining he was a prevailing party and claiming it was not necessary to find that Mr. Ramos brought the action against Mr. Garcia in bad faith.

On appeal, the Ramos court began with a review of section 218.5. This law permits an award of attorney fees to either employees or employers who prevail on an “action brought for the nonpayment of wages,” or “on account of nonpayment of wages.” But where a prevailing party is “not an employee,” an award of attorney fees and costs may be made “only if the court finds that the employee brought the court action in bad faith.”

The court of appeal next turned to California’s minimum wage and overtime law (Labor Code section 1194), which provides that any employee receiving less than the legal minimum wage or overtime compensation is entitled to recover reasonable attorney’s fees. If an employee is unsuccessful in a suit for minimum wages or overtime, however, section 1194 does not permit a prevailing employer to recover fees or costs.

Starting with the minimum wage and overtime claims, the Ramos court found that although Mr. Garcia was unsuccessfully sued as a defendant, he was not a “prevailing aggrieved employee” for purposes of attorney fees. Section 1194 only permits a prevailing employee to recover fees or costs. Mr. Garcia was not a prevailing employee because he was not the plaintiff seeking unpaid minimum wage or overtime compensation against his employer. Instead, Mr. Garcia was simply the incorrect person for Mr. Ramos to bring his claims against, and that was the sole reason he prevailed at trial.

With respect to the meal and rest periods claims, there is no award of attorney fees to a prevailing party, under either sections 218.5 or 1194. Consequently, although Mr. Ramos did not prevail against any of the defendants for these claims, Mr. Garcia could not recover attorney’s fees.

Finally, as to the waiting time and personnel records claims for penalties, the court of appeal considered whether they involved the nonpayment of wages. The appellate court determined that even if Mr. Ramos’s claims for penalties were considered “nonpayment of wages,” Mr. Garcia did not qualify as a prevailing party. Mr. Ramos’s recovery of penalties against the two employers did not make Mr. Garcia a prevailing party within section 218.5.

The court of appeal then considered the “bad faith” test in section 218.5. Mr. Garcia was sued as if he were “not an employee,” but effectively, he prevailed as an “employee” or “co-employee.” Under section 218.5, there shall be no award of prevailing party fees and costs unless the “employee” (i.e., plaintiff) sued in bad faith. The fact that Mr. Ramos succeeded on his claims against the two employers indicated there was some legitimacy to his claims, even though he was wrong about Mr. Garcia’s role.

The Ramos court decided that to award Mr. Garcia attorney fees as a “prevailing employee,” simply because he was found not to be Mr. Ramos’s employer, ignored the intent of California law: the protection of employees who sue their employer for nonpayment of wages in good faith against being held liable for the employer’s attorney’s fees. The appellate court concluded that section 218.5 is not intended to authorize an attorney fee award against an employee who unsuccessfully sues a fellow employee, even on nonpayment of wage claims.

Posted by deanroyerlaw