A very recent California Court of appeal case hammered home the point that the state’s wage and hour laws, and how they are applied, are intentionally skewed in favor of employees—so much so that even provisions of the California Code of Civil Procedure are bent to achieve that end.
In Chavez v. Cal. Collision, LLC, No. A167658 (Cal. Ct. App. Dec. 10, 2024), California’s First Appellate District overturned the trial court’s award of $54,000 in court costs to an employer defendant. The Court did so even though the award of costs would generally have been appropriate under section 998 of the Code of Civil Procedure. Court costs do not include attorneys’ fees, but do include such expenses as filing fees, transcript costs, service of process costs, and expert witness fess.
Section 998 provides that a “plaintiff shall not recover his or her post-offer costs and shall pay the defendant's costs from the time of the offer" if two requirements are met. First, the defendant must make an offer of compromise that the plaintiff does not accept. Second, the plaintiff also does not receive an award greater that defendant’s Section 998 offer in compromise.
The public policy underlying Section 998 is to foster the compromise of disputed claims. The plaintiff receiving a 998 offer of compromise is encouraged to accept the settlement offer if they reasonably stand to gain less than the settlement offer.
The encouragement is in the form of having to pay the defendant’s court costs, including expert witness fees, if the plaintiff ends up being awarded less than the settlement offer. On the other hand, the defendant is encouraged to offer a settlement amount that is greater than the predicted value of a potential award to the plaintiff. The more money that the defendant offers, the greater the chance that plaintiff may be required to pay the defendant’s court costs.
In the Chavez case, even though both of the requirements for an award of costs against the plaintiff were satisfied, the First Appellate District overturned the trial court’s award of litigation costs to the employer.
In reaching its decision, the Court of appeal focused on two California Labor Code sections that provide for an award of post-judgment attorneys’ fees and costs.
The first is Labor Code section 1194, which is a one-way statute that only allows employees to recover attorneys’ fees and costs in claims for unpaid minimum wage and overtime. That statute is silent on whether a prevailing employer may be entitled to an award of costs, even though attorneys’ fees are not available to them. The second is Labor Code 218.5, which permits a prevailing employer to recover both attorneys’ fees and costs, but only if the employer can meet the additional burden of showing that the employee brought the unpaid wages suit in bad faith.
In overturning the award of costs to the employer defendant, the Court of Appeal stated that, “Our conclusion is supported by the strong public policy interest underpinning the cost-shifting provisions in Labor Code sections 1194 and 218.5.” The holding, however, gives short shrift to the countervailing public policy interests underpinning Code of Civil Procedure Section 998.
The practical takeaway from the Chavez case is that, once again, employers should not expect a level playing field when litigating a wage-hour case under the California Labor Code. Employees in Labor Code wage and hour cases are essentially immune from the litigation deterrents that apply to all other plaintiffs under Code of Civil Procedure section 998. Ultimately, this is an issue for the California legislature to take up.
chanley@EAGLawGroup.com
https://law.justia.com/cases/california/court-of-appeal/2024/a167658.html