A Decent Ruling, But Not All It Could Be

Rest and meal period class actions have vexed California employers and outsiders trying to conduct business in California for several years.  Even a minor violation is argued to cascade into an array of class-wide claims that have been used to extract tens or hundreds of millions of dollars from employers.  Worse, plaintiffs may be awarded their attorney fees, making litigation of a wage and hour class action doubly expensive for the employer.   Last month’s Brinker decision, which we discussed here on April 12, cut back the worst of the theories raised by plaintiffs and also addressed other issues that may be used to curtail California wage and hour class actions in the future.

Last Monday, the California Supreme Court issued a decision on the issue of attorney fees in meal and rest period cases.  While Brinker was far better for employers than not, the new case, Kirby v. Immoos Fire Protection Inc.pdf., Case No. S185827 (Cal. S. Ct. Apr. 30, 2012), is less of a clear victory.

The issue in Kirby related to attorney fees and presented the unusual question of whether an employer who prevailed in a meal and rest period case could recover its attorney fees.  The court of appeals, construing California’s statutory requirements literally, found that it could, and awarded attorney fees against the plaintiffs.

The California Supreme Court began its opinion by noting that the question was, indeed, one of statutory construction.  The issue related to the construction of two California wage and hour statutes, one only permitting attorney fee awards to plaintiffs (Labor Code section 1194), and one permitting attorney fee awards in both directions (section 218.5).  Section 218.5, at first blush, appeared to apply in that it governed actions brought for the nonpayment of wages and the California Supreme Court had previously held that rest and meal period claims were wage claims, not ones for penalties (subject to a shorter statute of limitations).  See Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007).

Engaging in mental gymnastics to avoid the ruling in Murphy, the court created a distinction between a claim to “obtain” unpaid wages versus one “on account of” unpaid wages.  Based on this new distinction, the court found that NEITHER side could recover their attorney fees in a rest and meal period case because a claim based on claimed rest and meal period violations was not specifically one to “obtain” unpaid wages.

So, this presents a bad news, good news, bad news result.  The bad news is that employers who prevail in rest and meal period cases cannot recover their attorney fees.  This is not a major issue because it arises so rarely.  The good news, and it is very good, is that plaintiffs cannot recover their attorney fees in these cases either, making it less profitable for the attorneys to file and pursue such claims, and also less expensive for the employer. 

But here is the second bit of bad news.  Increasingly plaintiffs are joining their rest and meal periods with Private Attorneys General Act (“PAGA”) claims under which attorney fees may be recovered.  Further the California legislature can, and may very well, amend the statute to permit one-way recovery of attorney fees in rest and meal period cases.  For now, this looks like a better ruling for employers than not, but one that may prove to be short-lived.

The Bottom Line:  Prevailing plaintiffs in California meal and rest period cases cannot recover their attorney fees as part of claims to recover wages, but other avenues may exist for them to do so.