In the wake of the California Supreme Court’s (“the Court”) landmark decision in Brinker v. Superior Court, See Bingham alert, April 13, 2012, the Court handed down another important meal and rest break decision in Kirby et al. v. Immoos Fire Protection, Inc. In Kirby, the Court ruled that neither California Labor Code section 218.5 nor section 1194 authorizes an award of lawyer’s fees to a prevailing party in an action brought pursuant to California Labor Code 226.7 for missed meal and rest periods. This decision, along with the decision in Brinker, will reduce employees’ incentives to bring meal and rest period claims.
Background
Under the so-called “American rule,” each party is generally responsible for covering their own lawyer’s fees. This rule can be altered, however, by an agreement between the parties or by a statute providing for fee shifting. At issue in Kirby was whether California Labor Code sections 218.5 or 1194 authorized an award of fees to a prevailing party in a claim for meal and rest period violations.
In Kirby, employees Anthony Kirby and Rich Leech, Jr. brought seven claims against their employer, Immoos Fire Protection, Inc. (“IFP”), alleging violations of California’s labor and unfair competition laws. Kirby and Leech alleged that IFP failed to provide them rest breaks as required by California Labor Code section 226.7, a claim that was ultimately dismissed with prejudice after the case was settled. IFP moved to recover its lawyer’s fees pursuant to California Labor Code section 218.5. The trial court awarded fees and the Court of Appeal affirmed. The California Supreme Court granted review to consider when, if ever, a prevailing party in a meal and rest period action brought pursuant to section 226.7 can recover lawyer’s fees.
The Kirby Decision
In a decision rendered earlier than expected, the Court unanimously concluded that neither section 218.5 nor section 1194 authorizes an award of lawyer’s fees to a prevailing party in an action for missed meal and rest periods. With respect to section 1194 — a one-way fee shifting provision in favor of prevailing employees — the Court stated that there is no indication that the legislature intended for that section to provide recovery of lawyer’s fees in any action, other than one involving claims for unpaid minimum wages or overtime compensation, and that none of the plain text of section 1194, the legislative history or the language of related statutes provided any reason to apply the fee shifting provision of section 1194 to claims for missed meal and rest periods.
Similarly, the Court concluded that missed meal and rest period claims are not actions “brought for the nonpayment of wages” within the meaning of section 218.5 — a two-way fee shifting provision that allows either employers or employees to recover lawyer’s fees. The Court distinguished section 218.5 from section 226.7, stating that actions for missed meal and rest periods are intended to ensure the health and welfare of employees, not employees’ receipt of wages. Although the remedy provided to employees for missed meal and rest periods — one additional hour of pay — has been deemed a “wage” in previous California cases for purposes of determining the applicable statute of limitations, the Court distinguished the nature of the legal duty in section 218.5 from that in section 226.7 and concluded that missed meal and rest period actions were not wage claims for the purpose of section 218.5’s fee-shifting provision. The Court concluded that claims brought pursuant to section 226.7 are thus “governed by the default American rule that each side must cover its own [lawyer]’s fees.”
Significance for Employers
While the Court’s decision deprived the employer — IFP — of an award of lawyer’s fees in a rest period action, the case is largely a victory for employers, since the inability of plaintiffs to collect lawyer’s fees will most certainly reduce the potential value of meal and rest period actions. The Court’s distinction between missed meal and rest periods as a “wage” for statute of limitations purposes, but not for statutory recovery of lawyer’s fees for “nonpayment of wages,” is also significant since it will enable employers to argue that California Labor Code section 203’s waiting time penalties for unpaid wages does not apply to claims for missed meal and rest periods.
It remains to be seen whether employees will look to recover lawyer’s fees in actions for missed meal and rest periods using a different fee-shifting statute, or whether the legislature will seek to reverse the Kirby decision by statute. But for now, Kirby, like Brinker, which preceded it, is good news for employers and should result in fewer claims for missed meal and rest periods.
Contacts
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Aguilera-JacquelineThis article was originally published by Bingham McCutchen LLP.