In Kirby v. Immoos Fire Protection, Inc., the California Supreme Court determined that a party prevailing on a claim of failure to provide rest periods in violation of Labor Code § 226.7 is not entitled to attorney fees under the attorney fee-shifting wage statutes.
The plaintiffs in Kirby alleged that their employer, Immoos Fire Protection, violated various labor laws and the unfair competition law by (among other things) failing to provide rest breaks in accordance with Labor Code § 226.7 and in addition, alleged that various builders unlawfully entered into contracts with Immoos knowing that the contracts did not provide sufficient funds for Immoos to meet its obligations under the California wage laws. After settling with the builder defendants, plaintiffs dismissed all claims against all parties with prejudice. Immoos then moved for attorneys’ fees under Labor Code § 218.5, arguing that it prevailed in an “action brought for the nonpayment of wages” because it prevailed on the rest period claims. The trial court ordered plaintiffs to pay $49,846 in attorneys’ fees to Immoos, and the Court of Appeal affirmed the award of fees. The California Supreme Court granted review to determine whether attorneys’ fees can be awarded to a party that prevails in a cause of action for failure to provide rest periods under Labor Code § 226.7.
The primary issue in dispute was whether a claim for failure to provide rest periods was an action covered by either of the fee-shifting wage statutes, Labor Code §§ 218.5 and 1194. Labor Code § 218.5 contains a two-way attorneys’ fees shifting provision for the prevailing party (meaning either the employee-plaintiff or the defendant-employer can recover), while Labor Code § 1194 provides a one-way shifting of fees to only employees who prevail in claims for unpaid minimum wages and overtime.
The court first dismissed plaintiffs’ argument that Section 1194 exclusively governs rest period claims, and therefore only plaintiffs are allowed to recover attorneys’ fees. The court held that Section 1194 applies to claims for unpaid minimum wages and unpaid overtime, and nothing else. Therefore, employees who prevail on a claim for missed rest (or meal) periods under Labor Code § 226.7 are not entitled to recover attorneys’ fees.
The court further determined that a claim for missed rest periods does not amount to an “action brought for the nonpayment of wages” for purposes of the two-way fee shifting statute, Section 218.5. The court found that the legislature intended that Section 226.7 was to be governed by the “American rule” that each side must pay their own attorneys’ fees. Accordingly, the court reversed the Court of Appeal and denied Immoos recovery of its attorneys’ fees.
While the employer in Kirby was denied its right to recover attorneys’ fees, the Kirby holding should still come as very welcome news to California employers: The ability to recover a large mandatory attorneys’ fees award – which may exceed even the recovery by a claimant on the underlying claims – is a significant incentive for employees to pursue litigation. Without this incentive, plaintiffs and plaintiffs’ attorneys may be less inclined to pursue meal and rest period claims. However, the best way for employers to prevent unnecessary claims remains to be vigilant in ensuring that they are in full compliance with their obligations under the wage and hour laws.