Employers’ Right To Attorneys’ Fees In Wage Cases Foreclosed

California Labor Code section 218.5 (a), in wage nonpayment cases, prohibits an employer from recovering fees when he defeats the employee’s wage claim unless the trial court finds the employee brought the wage claim in bad faith. On the other hand, the Section permits the prevailing employee to recover his or her attorneys’ fees.

California Civil Code section 1717 permits recovery of reasonable attorneys’ fees by the prevailing party if the contract permits such an award.

Recently, in Dane-Elec Corp. v. Bodokh, the California Fourth Appellate District Court addressed what happens to a prevailing employer’s right to recover reasonable attorneys’ fees based on Civil Code section 1717 in light of Labor Code section 218.5 (a). The Court held, unless a bad faith wage claim is involved that would trigger fee entitlement to the prevailing employer, Labor Code section 218.5 (a) controls over the contractual fee provision and the prevailing employer cannot recover attorneys’ fees under the contract.

In California, it is virtually impossible for prevailing employers to recover attorneys’ fees from employees who file invalid wage and hour claims. Therefore, strict adherence to wage and hour laws, while required to avoid liability, damages and penalties, will not stop disgruntled employees from asserting tenuous claims.

If you are a California employer sit down with legal counsel. Together you should draft a program that includes insurance, valid employment contract provisions that can limit the effect of Labor Code section 218.5 (a) and dissuade employee lawsuits, claims handling, employment documentation and recordkeeping. That plan can save an employer thousands of dollars in attorney’s fees and settlements.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.