On April 30, 2012, the California Supreme Court handed down Kirby v. Immoos Fire Protection, Inc., a case that addresses the alleged right of an employer to recover attorney's fees when it prevails in an actions for meal or rest periods asserted under Labor Code Section 226.7.
The employer prevailed in an action that asserted both a claim for unpaid overtime and a claim for failure to provide rest periods. The employer was awarded attorney's fees attributable to the rest period claim under Labor Code Section 218.5, which allows a prevailing party to recover attorney's fees in an action "for nonpayment of wages." By contrast, under Labor Code Section 1194, attorney's fees are available only to the prevailing plaintiff in an action for failure to pay "the legal minimum wage or the legal overtime compensation." Section 218.5 expressly states that it does not apply "to any action for which attorney's fees are recoverable under Section 1194." The plaintiff appealed the award of attorney's fees under Section 218.5, arguing that the employer could not recover under that section, and the case ultimately made its way to the California Supreme Court.
The California Supreme Court addressed three separate arguments directed to the question of whether the employer could recover attorney's fees: (1) is a claim for rest periods a claim for "the legal minimum wage," which would bring it within Section 1194? (2) if no, is a claim for rest periods a claim "for nonpayment of wages," which would bring it within Section 218.5?; and (3) if yes, may the employer recover attorney's fees for a rest period claim when the action also includes an overtime claim that unquestionably is covered by Section 1194? As explained below, the court undertook a rather counter-intuitive analysis of the statutes to conclude that no party can recover attorney's fees for meal and rest period claims, regardless of who prevails.
The Imoos opinion, penned by Justice Godwin Liu, answered both questions (1) and (2) no, finding that a rest period claim is covered by neither Section 218.5 nor Section 1194. Because the employer had no right to recover attorney's fees under Section 218.5, the Court declined to reach the question of whether an employer can recover fees for claims that fall within the scope of Section 218.5 when they are brought together with other claims that fall under Section 1194.
The issue of whether a rest period claim falls under Section 1194 was a very straightforward analysis. The Court interpreted a claim for "legal minimum wage" as a claim asserting that the employer failed to pay at least the legal minimum wage for an hour worked (i.e., $8 per hour). The Court rejected the plaintiff's proffered interpretation that a claim for the "legal minimum wage" meant any claim seeking a "minimum payment amount" as an "obligation on employers . . . based on important public policy." The Court rejected this broad interpretation as unsupported by the text of the statute, legislative history, case law, or common sense. Indeed, such a broad definition of "legal minimum wage" would sweep the requirement to pay overtime pay within its scope, thus rendering the reference to claims for "overtime pay" within Section 1194 superfluous.
The analysis of the scope of Section 218.5 was more creative, and seemed to border on sophistry. The court reconciled two premises that seem to be at odds: (1) that the "premium pay" an employer owes for rest period violations is a "wage" (as the Court had previously held in Murphy v. Kenneth Cole Prods.) and (2) that an action to recover such premium pay is not an action for "nonpayment of wages" as would bring the claim within the scope of Section 218.5.
Justice Liu explained for the unanimous Court that an action for rest periods is really an action for nonprovision of rest periods, to be contrasted with an action where an employer has refused to pay employee his wages for the hours the employee worked. The remedy for the non-provision of rest periods just happens to be a wage (at least for purposes of calculating the statute of limitations), but the action is still not an action for "nonpayment of wages" even if it is, in effect, an action for recovery of wages. In other words the Court held that the recovery of wages is just a remedy, but the action is not for the "nonpayment of wages" much in the manner that a personal injury tort action is not an action for the "nonpayment of damages."
I doubt too many employers are greatly concerned about their ability to chase around employee plaintiffs, who are usually judgment proof, for attorney's fees (although that right might provide some leverage in settlement talks), so this case may not be of great significance to most employers.
The Court's logical gymnastics yielded an interesting nugget, however, that Justice Liu probably did not intend. The extension of his reasoning could be useful to employers opposing class certification in a meal period class action. In explaining how an action for failure to provide meal and rest periods is not an action for nonpayment of wages, the Court explained that Labor Code Section 226.7 does not require payment of wages and paying the wages for a missed meal period does not constitute compliance with the statute. As the Court explained it
"The 'additional hour of pay' provided for in subdivision (b) is the legal remedy for a violation of subdivision (a), but whether or not it has been paid is irrelevant to whether section 226.7 was violated. . . . An employer's failure to provide an additional hour of pay does not form part of a section 226.7 violation, and an employer's provision of an additional hour of pay does not excuse a section 226.7 violation." (emphasis added)
If that is true and non-payment of the premium pay does not form part of a section 226.7 violation, then it should be irrelevant for purposes of class certification whether an employer lacks a policy to pay the hour of pay voluntarily when it detects a missed meal period or rest period. Plaintiffs try to use the lack of any such policy as a "common issue" that could support class certification of a meal period claim. But if the issue of whether an employer pays the premium voluntarily is wholly distinct from whether it complies with the statute, then the whole issue should become irrelevant for class certification. After all, a common issue has to be one that would support resolution of a central issue in "one stroke." How can an issue irrelevant to liability meet that test?
Which leads me to question again, how is it that plaintiffs intend to get meal period cases certified now in the absence of a policy prohibiting the taking of meal periods? If you would like guidance on that issue, please do not hesitate to call Sheppard Mullin for assistance.