California Limits Employers’ Recovery of Prevailing Party Attorneys’ Fees in Claims under the Labor Code

Governor Brown recently signed Senate Bill (SB) 462 which amends Labor Code section 218.5 to restrict an employer’s ability to recover attorneys’ fees when it is the prevailing party to circumstances where the employee brought the wage and hour action in bad faith.  More after the break.

Prior to the enactment of SB 462, Labor Code section 218.5 provided that except for limited circumstances, in an action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the prevailing party (either the employee or the employer) was entitled to an award of its reasonable attorneys’ fees and costs upon request by the prevailing party at the initiation of the action.  SB 462 amends section 218.5 to provide that when the employer is the prevailing party, it may only be awarded attorneys’ fees and cost if the court finds the employee brought the matter in bad faith.

Specifically, section 218.5 will now read in part that “if the prevailing party in the court action is not an employee, attorney’s fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.”  The amendment to section 218.5 will be effective January 1, 2014.  By its terms, section 218.5 continues to not apply to claims for attorneys’ fees that are recoverable under Labor Code section 1194 (i.e. claims to recover minimum wage or overtime pay).

To read the full text of SB 462, click here.

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