New California Law Limiting When Prevailing Employers Can Recover Attorney's Fees In Wage-Hour Cases Is Bound To Lead To Even More Meritless Lawsuits
By Michael Kun
A California plaintiff who prevails in a wage-hour lawsuit generally may recover his or her attorney’s fees. The same is so for employers -- but only for the next few months.
A new statute will take effect in January 2014 that will change whether and how an employer who prevails in such a case may recover its fees. In a state already overrun with wage-hour lawsuits with questionable merit, that new statute seems to ensure that even more meritless wage-hour lawsuits will be filed by plaintiffs’ counsel who count on the in terrorem effect of those lawsuits to force employers to settle such claims – and who pocket 40% of what they recover.
Governor Jerry Brown has signed into law a bill that raises the standard for a prevailing employer to recover fees when they prevail in wage-hour actions. Effective January 2014, an employer must meet a higher standard than an employee to recover fees. It must not only prevail in the lawsuit, but it must establish that the lawsuit was brought in “bad faith.”
While the authors of the bill contended that it was needed to correct an injustice that discouraged workers from pursuing such claims, one has to wonder whether those legislators could identify a single California employee who did not pursue a valid wage-hour claim because of the fear of paying attorney’s fees. The California courts have been overrun with wage-hour lawsuits. There is little, if anything, to suggest that employees have been deterred from filing these lawsuits. If anything, they have been greatly encouraged to do so, and plaintiffs’ counsel sometimes file these suits with little effort to determine if they have any merit beforehand. Indeed, it is not unusual for an employee not to even meet his or her attorney before the attorney files a wage-hour suit, or for that attorney to file a wage-hour class action with minimal, if any, investigation.
In this way, the new statute seems to be aimed to benefit the plaintiffs’ bar, not employees. Until now, the only thing that prevented plaintiffs’ counsel from filing a meritless wage-hour action was the possibility that the employer would be able to recover its attorney’s fees. Now, knowing that an employer is only going to be able to recover fees in meritless cases if it can establish that it was brought in “bad faith,” there is every reason to expect the filing of even more meritless wage-hour actions.