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Tuesday, August 10, 2010

Court of Appeal Affirms Section 218.5 Attorney Fee Award to Defendant

The First District Court of Appeal has affirmed an award of attorney fees to a defendant under Labor Code section 218.5. Kirby v. Immoos Fire Protection, Inc. (July 27, 2010) --- Cal.App.4th ---.

The plaintiffs filed a putative class action for violation of the Unfair Competition Law ("UCL") and California wage and hour laws. After the court denied class certification, the plaintiffs settled with a number of defendants and dismissed the action with prejudice as to the remaining defendant, Immoos.

Immoos moved for attorney fees under Labor Code section 218.5. The Court awarded Immoos its fees incurred in defending plaintiffs' causes of action for violation of the UCL, rest period requirements, and Labor Code section 2810.

The Court of Appeal reversed the award of attorney fees on the UCL cause of action. Kim Kralowec has a good discussion of the UCL issue on her blog, the UCL Practitioner.

The Court also reversed on the 2810 cause of action. For those not familiar with it, section 2810 provides in pertinent part:
(a) A person or entity may not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided.
Immoos was not a defendant on the 2810 cause of action, and the Court of Appeal held that it could not recover attorney fees on this cause of action.

The most interesting issue is on the plaintiff's rest period claim and the relationship between Labor Code sections 218.5 and 1194. The Court put this issue as follows:
[Plaintiff] contends the trial court erred in awarding any attorney's fees to[defendant] because some of the causes of action were subject to the unilateral fee shifting provision in favor of plaintiffs provided by section 1194. [Plaintiff] points out that section 218.5 includes an express exception to its bilateral fee-shifting provision, which states: “This section does not apply to any action for which attorney's fees are recoverable under Section 1194.” (Italics added) Arguing that an “action” refers to an entire case, [plaintiff] concludes that the inclusion of causes of action subject to section 1194 bars [defendant's] recovery of any attorney's fees in this case. We disagree.
Slip op. at 3.

The Court first noted that 218.5(b) codifies the holding in Earley v. Superior Court (2000) 79 Cal.App.4th 1420. Earley held that 1194 controls in an action for unpaid overtime compensation, and 218.5 does not allow a successful defendant to recover its fees in such an action.

After reviewing the legislative history, the Court then held that the section 1194 exception to section 218.5 applies "only to causes of action for unpaid minimum and overtime wages." Slip op. at 6.
We harmonize sections 218.5 and 1194 by holding that section 218.5 applies to causes of action alleging nonpayment of wages, fringe benefits, or contributions to health, welfare and pension funds. If, in the same case, a plaintiff adds a cause of action for nonpayment of minimum wages or overtime, a defendant cannot recover attorney's fees for work in defending against the minimum wage or overtime claims. Nonetheless, the addition of a claim for unpaid minimum wages or overtime does not preclude recovery by a prevailing defendant for a cause of action unrelated to the minimum wage or overtime claim so long as a statute or contract provides for fee shifting in favor of the defendant.
Slip op. at 6.

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