Kirby Clarifies Post-Brinker Attorney Fees

Daily Journal

On the heels of Brinker, on April 30, the California Supreme Court issued its unanimous opinion in Kirby v. Immoos Fire Protection Inc. (2012) Case No. S185827, holding that prevailing parties in rest or meal break actions may not recover attorney fees under California Labor Code Sections 218.5 and 1194. In reversing the Court of Appeal's decision, the Court analyzed the interplay of California Labor Code Section 226.7, which provides for the payment of an additional hour of pay as compensation for meal and rest break violations; Section 218.5, which provides for attorney fees and costs to the prevailing party (employer or employee) in an action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, but not in an action for which attorney fees are recoverable under Section 1194; and Section 1194, which provides for attorney fees to prevailing employees only (not employers) in claims for unpaid minimum wages.

The plaintiffs' claims were for violations of various state labor laws and the unfair competition law. After settling with the individually named defendants, plaintiffs dismissed with prejudice their claim against their employer, Immoos, for failure to provide rest breaks under Section 226.7. Immoos then moved, as the prevailing party, for its attorney fees under Section 218.5. The trial court awarded the fees and the Court of Appeal affirmed on the grounds that an award of attorney fees was proper under Section 218.5 because plaintiffs were seeking "additional wages" for missed rest periods. The Court of Appeal rejected plaintiffs' argument that the unilateral fee-shifting provision of Section 1194 barred an attorney fee award to their employer. The Supreme Court granted review for the limited purpose of addressing whether attorney fees can be awarded under either Section 1194 or Section 218.5 to a prevailing party in a Section 226.7 action.

The Court first addressed Section 1194. Section 1194(a) entitles "any employee receiving less than the legal minimum wage or the legal overtime compensation ... to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, [and] reasonable attorney's fees ... ." In addressing this issue, the Supreme Court performed an in-depth statutory and historical analysis of Section 1194. Noting that neither the plain text and history of Section 1194 nor language of related statutes provides any basis to depart from the ordinary meaning of Section 1194, the Court flatly rejected plaintiffs' argument that Section 226.7's required payment for missed meal or rest periods is tantamount to a Section 1194 prescribed minimum wage. The Court concluded that it is up to the Legislature to decide whether Section 1194's one-way fee shifting provision should be broadened.

Turning to whether Section 218.5 authorizes an award of attorney fees to a party who prevails on a Section 226.7 claim, the Supreme Court framed the issue as to whether an employer's alleged failure to provide statutory mandated meal and rest breaks constitutes an "action brought for the nonpayment of wages" within the meaning of Section 218.5. Section 218.5 authorizes the award of fees to a party who prevails in an "action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions ... ."

As with Section 1194, the Court performed an in-depth statutory and historical analysis of Section 218.5. The Court concluded that in light of the statutory text and legislative history, Section 218.5's two-way fee-shifting provision does not apply to Section 226.7 claims and "the Legislature intended section 226.7 claims to be governed by the default American rule that each side must cover its own attorney's fees."

Finding no textual support in the statutory language of Section 218.5, nor factual support in its legislative history, the Court rejected Immoos' arguments and emphasized that Section 226.7 is not aimed at protecting employees' wages but rather ensuring their health and welfare by requiring that employers provide meal and rest periods. The Court further stated that its decision is not at odds with Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal. 4th 1094. It explained that although the remedy for the statutory violation of an employer failing to provide meal and rest periods is a "wage," this does not transform the gravamen of a Section 227.6 violation into a nonpayment of wage claim within the purview of Section 218.5. A Section 226.7 claim is an action brought for non-provision of meal or rest periods.

Although the Supreme Court's decision in Kirby prevents an employer from shifting fees to unsuccessful meal and rest plaintiffs, it has been touted as an employer victory given its potential deterrent impact on contingency fee arrangements between employees and their counsel. Notwithstanding, employees typically join other claims with meal and rest period violations including the California Labor Code Private Attorneys General Act, which provides for attorney fees awards. Moreover, the Court basically extended an invitation for legislative action.

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