Governor Signs SB 462 Which Clarifies Fee Shifiting for Wage Claims

Wage list

Wage list (Photo credit: Wikipedia)

ImageSB 462 (Author: Senator Bill Monning): Conforming  Attorneys’ Fees in unpaid wage cases so the winning employer must show the losing employee’s bad faith to recover attorneys’ fees :

Monday, August 26, 2013:  Today Governor Brown signed into law this important law which clarifies fee shifting for unpaid wage claims and makes fee shifting of attorneys’ fees for wage claims brought under Labor Code §218.5 consistent with Federal law and the rest of the Labor Code. (except for one other outlier fee award statute).

This new law  fixes what was an anomaly with attorneys’ fees awards for wage and hour actions under Labor Code §218.5.  Previously, if a California employee lost  his/her action to recover unpaid wages or benefits, she or he could be out the unpaid wages and also be liable for the winning employer’s attorneys’ fees.  This is because Labor Code §218.5 provided for attorneys’ fees to the “prevailing party”, not the “prevailing employee”, so “party” included the prevailing employer.   This law ignored the reality that in many if not most cases, the wealth gap between employer and employee made the employer far more likely to be able to afford paying both sides’ attorneys fees, while this possibility, which could financially ruin an employee, was a powerful deterrent to filing many legitimate wage theft claims.

No longer can employers flaunt wage laws, essentially bully their unpaid employees and unfairly compete with their law abiding competitors–with the unintended help of Labor Code §218.5‘s former two-way fee shifting.

In my practice I have seen the chilling effect the risk of having to pay a $500+/hour attorneys’ fee bill has on a wage earner earning a fraction of that who decides the risk is too big to take, so abandons a valid wage claim.

The new law only allows a prevailing employee to recover attorneys’ fees, unless a prevailing employer can show the employee brought the action in  “bad faith”.   Since this has long been the norm with most other fee award statutes, there is lots of authority on what is “bad faith”.

The question arises: is this law retroactive?  Please feel free to comment on this, below.

You can read the bill’s full text here:

Marjorie Wallace is a California licensed employment lawyer.  The information contained in this blog is for educational purposes only and does not create an attorney-client relationship between the writer and any reader or constitute legal advice to anyone reading it. 

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