Attorney’s Fees Not Recoverable in Meal and Rest Period Claims.

In a somewhat unexpected ruling that was favorable to the employee in this case but may ironically harm employees’ ability to protect their statutory right to meal and rest periods down the line, the California Supreme Court recently held that a prevailing party in a meal or rest period claim brought under Labor Code section 226.7 is not entitled to attorney’s fees under either Labor Code section 218.5 (a two-way fee-shifting statute for alleged “nonpayment of wages”) or Labor Code section 1194 (a one-way fee-shifting statute for alleged failure to pay “minimum wage or overtime compensation”). (Kirby v. Immoos Fire Protection, Inc., No. S185827 (Apr. 30, 2012) __ Cal.4th __, available at http://www.courtinfo.ca.gov/opinions/documents/S185827.PDF.)

Factual Summary.

In Kirby, joint plaintiffs Antony Kirby and Rick Leech, Jr., employees of defendant Immoos Fire Protection (“IFP”), sued IFP and various “Doe Defendants” for failing to provide statutorily mandated meal and rest periods. California law which generally requires that employees who work more than five hours in a shift be provided an uninterrupted 30-minute meal, and that employees be provided a paid 10-minute meal period for every 4 hours worked, or “major fraction thereof.” (See, e.g., Lab. Code § 512 IWC Wage Order No. 4, § 11.) The claims were settled between plaintiffs and the Doe Defendants, although — significantly— not with IFP.

That oversight came back to haunt plaintiffs and their counsel when, after they dismissed the entire claim with prejudice, IFP immediately seized the on opportunity to seek mandatory attorney’s fees under Section 218.5. If nothing else, this serves as a reminder to attorneys that a voluntarily dismissal of a claim is tantamount to an adverse judgment “on the merits” for purposes of recovery of attorney fees and costs. (See, e.g., Code Civ. Proc. § 1032(a)(4) [“Prevailing party" includes . . . a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief and a defendant as against those plaintiffs who do not recover any relief against that defendant.”].)

The trial court granted IFP attorney’s fees as to plaintiff’s meal and rest period claim under Section 218.5, which provides that “[i]n any action brought for the nonpayment of wages . . ., the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action.” The Court of Appeals affirmed.

Attorney’s Fees for Meal/Rest Period Violations Are Not Recoverable Under Labor Code § 218.5.

The California Supreme Court reversed, concluding that “in light of the relevant statutory language and legislative history, . . . neither section 1194 nor section 218.5 authorizes an award of attorney‟s fees to a party that prevails on a section 226.7 claim.” In doing so, the Court reasoned that even though Section 226.7 mandates employers to “pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided,” and even though it had previously designated such pay as “wages” (see Murphy v. Kenneth Cole Prods. (2007) 40 Cal.4th 1094, 1102), it does not follow that failure to provide meal and rest periods constitutes the “nonpayment of wages” for purposes of Section 218.5.

After reviewing the legislative history of Section 226.7, the Court found that on two separate occasions, a fee-shifting provision was included in earlier drafts of the statute but deleted in the final language, indicating that the legislature did not intend to permit recovery of attorney’s fees in meal and rest period claims. The opinion also devolved in to a lengthy and quite esoteric exegesis of how a “wage” in one context is not the same as “wage” in another context in seeking to distinguish its prior holding in Murphy and conclude that “[n]onpayment of wages is not the gravamen of a section 226.7 violation.” To wit:

As a textual matter, we note that section 218.5 uses the phrase “action brought for” to mean something different from what the phrase means when it is coupled with a particular remedy (e.g., “action brought for damages” or “action brought for injunctive relief”). An “action brought for damages” is an action brought to obtain damages. But an “action brought for nonpayment of wages” is not (absurdly) an action to obtain nonpayment of wages. Instead, it is an action brought on account of nonpayment of wages. The words “nonpayment of wages” in section 218.5 refer to an alleged legal violation, not a desired remedy.

Thus, while under Murphy premium pay for missed meal and rest periods are still considered “wages” (as opposed to “penalties”) for statute of limitations purposes, they are not considered “wages” for purposes of attorney fee statutes.

Attorney’s Fees for Meal/Rest Period Violations Are Not Recoverable Under Labor Code § 1194.

In dicta, the Court also dispatched with plaintiffs’ secondary argument that Labor Code section 1194, which mandates attorneys fees to a prevailing plaintiff (but not a defendant) in claims arising from the failure to pay the “legal minimum wage or the legal overtime compensation.” Plaintiffs invoked this argument as a means of precluding IFP from relying on Section 218.5 in the first place, as that section by its very terms does not encompass causes of action that trigger attorney’s fees under Section 1194. Were the Court to agree that recovery of attorney’s fees for meal and rest periods fell under Section 1194, not only would IFP not be able to claim fees under Section 218.5, but no prevailing defendant could ever seek attorney’s fees after a favorable judgment on a meal or rest period claim, because Section 1194 does not permit recovery of fees by a prevailing employer-defendant.

Unfortunately, the Court did not agree that a failure to compensate employees for missed meal or rest periods constituted a failure to pay “minimum wage.” Rather, the Court applied a literal interpretation to the term “minimum wage,” and concluded that “[n]either the plain text, the history of section 1194, nor the language of related statutes provides any reason to depart from the ordinary meaning of section 1194’s words.” In a nutshell, the Court held that Section 1194 is only applicable to provisions that explicitly prohibit paying less than minimum wage or the statutory overtime rate.

Effect of This Holding.

While the Kirby plaintiffs emerged victorious and were able to avoid paying $49,846.05 in attorney’s fees after prematurely dismissing their claim, the legacy of Kirby will likely be detrimental to employees and their counsel. This is because an employee’s damages incurred by not being provided meal and rest periods are generally relatively small (there are exceptions) and it may be difficult to obtain legal representation without a prospect of the recovery of fees. Without the prospect of having to pay large attorney fee awards, defendants may be less motivated to settle wage and hour claims early on, as they will not be disadvantaged by the increasing fees of their adversaries.

Certainly, plaintiff’s counsel in wage and hour cases also will not need to worry about being hit with an adverse attorney’s fees award if things go south, but this will likely not offset the fact that it may simply not be cost-effective in many cases to try meal and rest period claims (unless there are also minimum wage and overtime claims involved). Time will tell, but coupled with the recent landmark holding in Brinker Restaurants Inc. v. Superior Court, No. S166350 (Apr. 12, 2012)___ Cal.4th ___, it appears that the California Supreme Court is tacking in a direction that is decidedly antagonistic to the interests of California employees.