In re UPS Wage and Hour Cases: Court of Appeal Reverses Defendant’s Fee Award

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In re UPS Wage and Hour Cases: Court of Appeal Reverses Defendant’s Fee Award In a recent decision that is likely to discourage wage-and-hour class action defendants from seeking attorneys’ fees, California’s Second Appellate District, Division Eight, reversed the trial court’s award of $100,000 in fees to UPS after it prevailed at a rare jury trial as to misclassification-based overtime claims. See In re UPS Wage and Hour Cases, 192 Cal. App. 4th 1425, 1430 (Cal. Ct. App. 2011). Thus, despite having won the case, UPS was deemed not entitled to any attorneys’ fees whatsoever under California statutory and common law authority, which has deliberately guarded against creating disincentives to employees seeking to enforce workplace rights through class actions.

In a closely-reasoned decision, the unanimous three-justice panel carefully examined each of the plaintiff’s six causes of action on which UPS had prevailed, and concluded that there was not a basis for UPS’s recovery of attorneys’ fees as to any of the causes of action. Although the review of decisions awarding attorneys’ fees is ordinarily conducted under an abuse of discretion standard, here, because statutory interpretation was at issue, the In re UPS panel conducted an entirely de novo review. See id. at 1431.

Justice Grimes began by examining the interplay between Labor Code section 218.5, the bilateral fee-shifting statute, and Labor Code section 1194, which provides for the recovery of attorneys’ fees, but only to successful plaintiffs in minimum wage and overtime cases. See In re UPS at 1432-36. Underscoring that it was “[c]onstruing the entire statutory scheme with a view toward protecting employees,” the panel held that “a claim for remedial compensation under Labor Code section 226.7 does not trigger the reciprocal fee recovery provisions of Labor Code section 218.5. Since none of the claims on which UPS prevailed permit the recovery of attorney fees, the award of statutory fees to UPS was in error.” Id. at 1440.

The court’s exhaustive analysis noted that, although Section 1194 provides for fee awards only to prevailing employees on overtime compensation claims, Section 218.5 does not did not bar employers, here UPS, from seeking to recover the fees it incurred in defending the plaintiff’s other claims, such as: failure to provide meal and rest breaks; issuing statutorily non-compliant wage statements; common law conversion; and unfair competition. However, after analyzing each cause of action, the court concluded that there was no basis for UPS’s (or any similarly situated wage-and-hour defendant’s) recovery of fees. Section 1194 precluded recovery as to both state and federal overtime claims; Section 226 allowed fee awards to employees only; and California’s unfair competition law categorically does not authorize attorney fee awards. See In re UPS at 1432-35.

The key holding in this case for California’s wage-and-hour class action practitioners is that Section 218.5 does not reflexively imply that employer/defendants are entitled to recover attorneys’ fees, which will impact the numerous meal and rest break class actions still pending, many of which are stayed as the Supreme Court deliberates Brinker v. Superior Court, 80 Cal. Rptr. 3d 781 (Cal. Ct. App. 2008), rev. granted, 196 P.3d 216 (Cal. Oct. 22, 2008) (No. S166350).

The full opinion is available here.