SB 462 -- The California Legislature Shifts the Balance Against Employers ... Again

It's all about the money.  This is something the trial lawyers and their friends in the California Legislature know all too well. 

Labor Code section 218.5 requires that attorneys' fees be paid to the prevailing party in a lawsuit seeking unpaid wages, fringe benefits or pension plan contributions.  This section is always used by plaintiffs' lawyers when seeking alleged unpaid wages, overtime, reporting time pay and vacation benefits.  If their client wins, they ask the court for their attorneys' fees.  The court is required to grant the request.  Thus, primary issue is about the amount of hours worked by the lawyer. 

In 2012 the California Supreme Court confirmed that section 218.5 is mutual, meaning that an award of attorneys' fees is available to employers as well as to employees.  (Kirby v. Imoos Fire Protection, Inc. (2012) 53 Cal.4th 1244.)  Thus, if an employer successfully defends an action alleging unpaid wages, the employer can seek attorneys' fees from the employee.  Of course, the employee may not have the ability to pay an award of attorneys' fees.  So the employer might not have any real opportunity to recover its attorneys' fees.  However, section 218.5 acts as a check on plaintiffs to curtail litigation. 

The governor signed AB 462 which amends section 218.5.  It eliminates an employer's right to seek attorneys' fees unless it can show that the employee brought the action in bad faith.  Bad faith does not mean that the employee's case was frivolous or lacked merit.  Rather, bad faith requires an employer to prove the employee's evil motive.  Thus, section 218.5 essentially prevents employers, in all but the most egregious of cases, from seeking attorneys' fees. 

Why was this amendment needed?  Were employers going overboard and making the lives of unsuccessful litigants miserable?  No.  However, section 218.5 probably persuaded some employees from filing a lawsuit for fear of losing.  This, in turn, prevented plaintiffs' lawyers from losing out on some cases.  I think that these attorneys' fees shifting provisions are often used as legal extortion.  Many businesses, particularly smaller businesses, can't afford to spend the money on litigation of wage claims.  So, instead of fighting, they settle, and the lawyers make money.  It's a terrible system that often results in attorneys receiving more money than their clients.  The amendment to section 218.5 allows trial lawyers to bring more cases, without fear that their client will be subjected to an adverse award for attorneys' fees.