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Wage & Hour Litigation Just Became More Unfair for California Employers

Rick Morin, Sacramento Attorney

Rick Morin

The California Legislature recently passed, and the Governor enacted, Senate Bill 462 by Senator Bill Monning (D-Carmel) which disrupts the two-way street of fee shifting in wage and hour litigation.

SB 462 amends section 218.5 of the California Labor Code to preclude an employer from asking a court to award its reasonable attorney’s fees when it prevails in a lawsuit over the nonpayment of wages unless the court finds that the employee filed the lawsuit in bad faith.

The traditional “American Rule” when it comes to the payment of attorney’s fees is that parties to litigation typically pay their own attorney’s fees — it doesn’t matter who wins or who loses. This rule can be changed by contract or a provision of law.

Prior to the enactment of SB 462, the prevailing party in a wage and hour dispute was able to petition the court for an award of its attorneys fees on equal footing. With the enactment of SB 462, a prevailing employer may only ask for attorney’s fees if it can prove that an employee brought the wage and hour claim in “bad faith.”

SB 462 is unfair to business owners because it applies a different standard to the award of attorney’s fees depending on who asking: the standard is lower for employees, and the burden for a prevailing employer is much higher. What exactly constitutes “bad faith” is not defined in the legislation.

An award for attorney’s fees in a wage & hour dispute can often be many multiples more than the underlying damages. This has provided plaintiffs’ attorneys with a real incentive to bring numerous wage and hour claims to California courts because the attorney can make out like a bandit even if they only win $1 in court for their client.

Now that plaintiffs and their attorneys know that they will not likely be stuck paying a large attorneys’ fee award to a prevailing employer, they can bring even more meritless claims into California courts.

SB 462 will take effect January 1, 2014.

Please contact my office if you have any questions about SB 462 or wage and hour litigation. I can be reached at (916) 333-2222.

California Legal Update: Employee Personnel Records

California law imposes many duties on employers when it comes to the employer-employee relationship. These employment laws are generally found in the California Labor Code.

The California Legislature often passes new labor laws, and these changes can have a big impact on employers. For this reason, it is important for business owners to keep up with changes in the law.

One change to labor laws in 2012 was AB 2674 (Swanson). The law took effect January 1, 2013 and imposes additional record-keeping requirements on employers and gives employees additional rights to inspect personnel records.

Some of the specific changes made by AB 2674 to the California Labor Code include:

  1. An employee (current or former) now has a right to receive a copy of his or her personnel records. Previously, employees only had a right to inspect their personnel records. Employers have 30 calendar days to respond to a request by an employee. The law states that the request must be in writing.
  2. An employer is now allowed to redact the name of any non-supervisorial employee contained in the personnel records prior to allowing the inspection or copying of personnel records by the employee.
  3. An employer is now required to maintain personnel records for at least three years following an employee’s termination of employment. An employer is required to comply with only one request for inspection or copying per former employee per year.
  4. An employer is liable for a $750 penalty if the employer fails to comply with these requirements. An employee is also allowed to seek to recover costs and reasonable attorney’s fees in an action to enforce this new law.

Because of the possibility of a lawsuit by a former employee resulting in a $750 statutory penalty and potentially the imposition of attorney’s fees, employers need to take requests to inspect or copy personnel records very seriously.