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Tuesday, May 1, 2012

Kirby v. Immoos: Supreme Court Holds that Parties Cannot Recover Attorney Fees in Rest Period Actions

In Kirby v. Immoos Fire Protection, Inc. (4/30/12) 53 Cal.4th 1244, the California Supreme Court considered whether a defendant can recover its attorney fees when it prevails in an action for meal and rest period compensation under California Labor Code section 226.7. The Court held that the answer is no, and neither can a successful plaintiff.

Plaintiff Anthony Kirby worked for a contractor, IFP. He filed suit, alleging that IFP violated a number of wage and hour laws. He also named a number of doe defendants, alleging that they were liable under Labor Code section 2810 because they entered into contracts with IFP while knowing that the contracts did not provide sufficient funds to allow IFP to comply with all applicable labor and wage laws. Kirby settled with the doe defendants and dismissed his action against IFP. The trial court awarded IFP its attorney fees under Labor Code section 218.5, and the Court of Appeal affirmed. The Supreme Court reversed.

First, the Court held that a section 226.7 claim is not a claim for which attorney's fees can be awarded to a prevailing employee under Labor Code section 1194.  Section 1194 allows successful plaintiffs to recover attorney's fees in actions for the "legal minimum wage or the legal overtime compensation." The Court rejected Kirby's argument that the required payment for missed meal or rest periods is tantamount to a statutorily prescribed minimum wage. Slip op. at 7-8.

Next, the Court held that Labor Code section 218.5 does not authorize a prevailing party -- either the employer or the employee -- to recover its attorney's fees in an action under section 226.7. The Court based this on its conclusion that an action under section 226.7 does not constitute an “action brought for the nonpayment of wages” within the meaning of section 218.5. Slip op. at 11.  

Section 226.7 is not aimed at protecting or providing employees' wages. Instead, the statute is primarily concerned with ensuring the health and welfare of employees by requiring that employers provide meal and rest periods as mandated by the IWC. When an employee sues for a violation of section 226.7, he or she is suing because an employer has allegedly “require[d] [the] employee to work during [a] meal or rest period mandated by an applicable order of the Industrial Welfare Commission.” In other words, a section 226.7 action is brought for the nonprovision of meal and rest periods, not for the “nonpayment of wages.”
Slip op. at 11-12 (citations omitted).

The Court then explained its holding in light of Murphy v. Kenneth Cole Productions (2007) 40 Cal.4th 1094, in which it held that the remedy for a violation of section 226.7 is one additional hour of pay, and that such pay constitutes a wage, rather than a penalty. "Nonpayment of wages," the Court said, "is not the gravamen of a section 226.7 violation." Slip op. at 13.  

The “additional hour of pay” provided for in subdivision (b) is the legal remedy for a violation of subdivision (a), but whether or not it has been paid is irrelevant to whether section 226.7 was violated. In other words, section 226.7 does not give employers a lawful choice between providing either meal and rest breaks or an additional hour of pay. An employer's failure to provide an additional hour of pay does not form part of a section 226.7 violation, and an employer‟s provision of an additional hour of pay does not excuse a section 226.7 violation. The failure to provide required meal and rest breaks is what triggers a violation of section 226.7. Accordingly, a section 226.7 claim is not an action brought for nonpayment of wages; it is an action brought for non-provision of meal or rest breaks.
Slip op. at 13-14.

The Court found support for its holding in the legislative histories of sections 218.5 and 226.7. "In sum, the legislative history shows that the Legislature (a) considered including a one-way fee-shifting provision in favor of employees in section 226.7, (b) ultimately deleted the provision from the final version of section 226.7, and then (c) gave no indication that section 218.5's two-way fee-shifting rule should apply to section 226.7 claims, even as (d) it adopted amendments to section 218.5 as part of the very same legislation that created section 226.7." Slip op. at 17.

Finally, the Court rejected IFP's argument that the public policies of discouraging unmeritorious lawsuits and encouraging employees to file administrative complaints instead of civil suits support the applicability of section 218.5's two-way fee-shifting rule to section 226.7 claims. Slip op. at 17.

The Court's holding does not address the plaintiff's argument that that, when a suit includes claims covered by section 1194, that section shields an unsuccessful employee against a section 218.5 award of attorney fees in favor of a successful employer. That argument will have to wait for another day.  

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