On March 25, 2016, the Court of Appeal for the Sixth Appellate District held that an employer who successfully defeats an employee’s overtime claim brought pursuant to California Labor Code section 1194 is not entitled to seek attorney’s fees. The Court reaffirmed that Section 1194 has a “one-way fee shifting provision” which allows an employee to recover attorney’s fees for successfully pursuing an overtime claim, but does not provide the same right to employers who successfully defend the overtime claim. The Court also held that Labor Code section 218.5 which governs claims for non-payment of contains a “two-way fee shifting provision” which entitles the prevailing party, employer or employee, to seek attorney’s fees. Finally, the Court held that neither party is entitled to attorney’s fees for Labor Code section 226.7 claims for missed meal periods.
In Ling v. P. F. Chang’s China Bistro, Inc., (CA6 H039367) (“Ling”), Cynthia Ling sued P. F. Chang when she was terminated as a floor manager. Ling sought unpaid overtime wages and premium pay for failure to provide meal and rest periods. Ling also sought damages for unfair competition and attorney’s fees and costs. Ling incorporated her complaint into a demand for arbitration as required by her employment agreement with P.F. Chang. The arbitrator rejected Ling’s overtime claim. He did however, find that plaintiff was entitled to a “small monetary award” for part of her claim for missed meal periods. The arbitrator nonetheless held that P.F. Chang was the prevailing party on the missed meal periods claim, and he awarded it $212,685 in attorney’s fees, even though the missed meal period claim was “‘factually inextricably intertwined’ with the overtime claim.”
Plaintiff subsequently petitioned the trial court to vacate the arbitration award. Plaintiff argued that public policy and the one-way fee shifting provision of Labor Code section 1194 “precluded defendant from recovering any attorney’s fees.” The trial court agreed in part with plaintiff and ruled that “defendant was precluded by section 1194 from recovering attorney’s fees on plaintiff’s overtime claim or on plaintiff’s missed meal period claim to the extent the latter was inextricably intertwined with the overtime claim.” (Emphasis added). The trial court reversed the arbitrator’s award of attorney’s fees to P. F. Chang, deemed Plaintiff the prevailing party and awarded her costs, but denied her request for attorney’s fees. Both parties appealed.
The Sixth Circuit affirmed the majority of the trial court’s holding. It found that P. F. Chang was not entitled to attorney’s fees for defeating plaintiff’s Labor Code section 1194 overtime claim since the section “provides only for a successful plaintiff to recover attorney’s fees and costs.” The court found the section was a “one-way fee shifting statute precluding an employer from collecting fees and costs even if the employer prevails on a minimum wage or overtime claim.” (Emphasis added). The Court of Appeal also held that plaintiff was not entitled to attorney’s fees on her missed meal periods claim. The Court held that plaintiff’s missed meal period claim was not governed by either Section 1194 (one-way fee shifting statute) or Section 218.5 (two-way fee shifting statute) but rather by the “American Rule that each party bear its own attorney’s fees.” Finally, the Court upheld the trial court’s award of costs to plaintiff pursuant to Code of Civil Procedure section 1032 which awards costs as a matter of right to a prevailing party “in any action or proceeding” even if the prevailing party’s net monetary gain is limited. Thus, in the end, plaintiff was awarded costs, but no attorney’s fees, and P. F. Chang was denied costs and attorney’s fees.
The Ling case is an excellent primer on when attorney’s fees and costs are awarded in wage and hour cases. To summarize, the Court reaffirmed:
- Section 1194 is a one-way fee shifting provision that does not allow an award of attorney’s fees to an employer who successfully defeats an employee’s overtime claim;
- Section 218.5 is a limited two-way attorney’s fee provision which allows a prevailing employer to seek attorney’s fees if it proves the employee’s action was brought in bad faith;
- Attorney’s fees are not awarded to either party in a missed meal period claim; and
- Where a cause of action for overtime is “inextricably intertwined” with a meal period or other wage claim, the public policy embedded in section 1194, which is that employers not recover attorney’s fees in overtime actions, prohibits courts from awarding attorney’s fees to an employer even if it succeeds on the meal period or other wage claim.
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