Ling v. P.F. Chang's: Court Rules on Attorney Fee Award in Overtime and Meal Period Arbitration

In Ling v. P.F. Chang's China Bistro, Inc. (Cal.App. 3/25/16), Cynthia Ling sued P.F. Chang's for unpaid overtime and missed meal and rest periods, alleging that Chang's improperly classified her as an exempt employee while working as a floor manager. An arbitrator found that Ling was exempt as a floor manager, but also found that Chang's failed to provide her with meal periods during a brief training period. The arbitrator awarded Ling approximately $8,500 for missed meal periods and Labor Code section 203 waiting time penalties. Finding that Chang's was the prevailing party, the arbitrator awarded it $29,000 in costs under Code of Civil Procedure section 1032 and over $200,000 in attorney fees under Labor Code section 218.5.

The trial court corrected the award, holding that Ling was the prevailing party on her meal period claim and remanding to the arbitrator to award her fees, exclusive of those incurred solely in pursuing her unsuccessful overtime claim.

On remand, the arbitrator rejected Ling's fee request, relying on Kirby v. Immoos Fire Protection, Inc. (4/30/12) 53 Cal.4th 1244 (discussed here), but awarded Ling her costs as the prevailing party under CCP 1032(a)(4). The trial court confirmed the award, and both parties appealed. The Court of Appeal affirmed, holding as follows:

The trial court properly corrected the arbitrator's initial award because the arbitrator exceeded his powers by issuing an award that "contravened an explicit legislative expression of public policy."

Because plaintiff's missed meal periods claim (as it related to her service as a floor manager) and overtime claim required identical proof, the attorney's fees award for defending the 'factually inextricably intertwined' meal periods claim was effectively a fee award for defeating plaintiff's overtime claim, prohibited by section 1194.

The Court rejected Chang's argument that the Federal Arbitration Act (FAA) prohibited the trial court from remanding the attorney fee issue. Similar to the California Arbitration Act (CAA), the FAA provides for vacatur where an arbitrator exceeds his or her powers.

The Court rejected Ling's argument that the trial court should have vacated the initial award in its entirety, rather than merely correcting it. The trial court had no authority to vacate the award in its entirety and thus upset the arbitrator's ruling on the misclassification issue. 

The arbitrator did not exceed his authority in issuing his second award. 

The arbitrator was bound to follow Kirby and properly denied Ling attorney fees on her meal period claim. 

The arbitrator's denial of fees on the section 203 waiting time penalty claim did not deprive Ling of any unwaivable statutory right. An action for waiting time penalties based on failure to pay for missed meal periods is not an "action brought for the non-payment of wages" under section 218.5. 

Following Kirby, section 226.7 cannot support a section 203 penalty because section 203, subdivision (b) tethers the waiting time penalty to a separate action for wages. Because a section 203 claim is purely derivative of 'an action for the wages from which the penalties arise,' it cannot be the basis of a fee award when the underlying claim is not an action for wages.

The trial court erred in awarding Ling fees she incurred on her petition to vacate the first arbitration award. Neither the parties' agreement nor any statutory provision authorized any such award.

The opinion is available here.