Monday, February 28, 2011

Second District Narrows Applicability of Labor Code Section 218.5 Fee Shifting Provision: United Parcel Service Wage and Hour Cases

On February 24, 2011, the Second District (Division 8) concluded that the bi-lateral fee shifting provision of Section 218.5 did not apply to various wage related causes of action, including meal and rest period claims. See United Parcel Service Wage and Hour Cases, __ Cal.App.4th __ (2011).

With regard to meal and rest periods, the Court rejected the employer’s argument that the California Supreme Court’s analysis in Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007) establishes that an action for recovery of the statutory remedies for missed meal and rest breaks is a claim for “nonpayment of wages” within the meaning of Labor Code section 218.5. As reasoned by the Court, “nothing in the Murphy opinion suggests the court intended its decision to permit a prevailing employer-defendant in a section 226.7 action to recover attorney fees from the unsuccessful employee” and that “[t]o so find would undermine the Supreme Court's heavy reliance in its analysis on the principle that statutes governing working conditions must be liberally construed in favor of employees.” Slip Opinion, at 12. Rather, citing to the analysis in Earley v. Superior Court, 79 Cal. App. 4th 1420 (2000), the Court concluded that Section 226.7 was properly covered by the unilateral fee shifting provisions of Section 1194 because, like overtime compensation, the obligation to pay the Section 226.7 premium wage derives from statute. See id., at 12-13. Significantly, such reasoning is a complete refutation of the court's analysis in Kirby v. Immoos Fire Protection, 186 Cal. App. 4th 1361 (2010), which as previously discussed here, is pending review before the California Supreme Court.

In addition to the foregoing, the UPS Court also deemed Section 218.5 inapplicable to (1) wage statement claims, due to the fact Labor Code Section 226(e) itself contains a unilateral fee shifting provision, (2) conversion, based on the finding that Section 218.5 does not apply to common law torts, and (3) the UCL, based on existing authority concluding that the UCL does not incorporate fee provisions of the underlying predicate statute.  See id., at 10-11.

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