On April 30, 2012, the California Supreme Court issued its ruling in Kirby v. Immoos Fire Protection, Inc.,1 concluding that neither party may recover attorney’s fees on claims involving meal and rest period violations. In doing so, the Court reversed the Court of Appeal’s ruling which affirmed the trial court’s award of fees. The California Supreme Court granted review to consider when, if ever, a party who prevails on a Labor Code section 226.7 action for alleged failure to provide rest breaks may be awarded attorney’s fees.
Plaintiffs Anthony Kirby and Rick Leech, Jr. (“Plaintiffs”) sued Defendant Immoos Fire Protection, Inc. (“IFP”) and Doe defendants for labor code violations as well as a claim under the unfair competition law (“UCL”). Plaintiffs’ amended complaint stated seven claims, the sixth of which alleged a failure to provide rest breaks pursuant to Labor Code section 226.7. After settling with the Doe defendants, Plaintiffs ultimately dismissed their Labor Code section 226.7 claim with prejudice. IFP subsequently moved for fees under Labor Code section 218.5. The trial court awarded fees, and the Court of Appeal affirmed.
Labor Code section 218.5 awards attorney’s fees to the prevailing party “[i]n any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions.” This is a two-way fee shifting provision. However, Labor Code section 218.5 “does not apply to any action for which attorney’s fees are recoverable under [Labor Code] section 1194.” Labor Code section 1194 provides that employees who prevail in any action for any unpaid “legal minimum wage or . . . legal overtime compensation” are entitled to recover attorney’s fees. It is a one-way fee shifting provision.
After reviewing the relevant statutory language and legislative history, the California Supreme Court ruled that neither Labor Code section 218.5 nor Labor Code section 1194 authorizes an award of attorney’s fees to a party that prevails on a section 226.7 claim. In reaching its decision, the California Supreme Court analyzed the legislative history of the meal and rest period provisions and concluded that “the most plausible inference to be drawn from history is that the Legislature intended section 226.7 claims to be governed by the default American rule that each side must cover its own attorney’s fees.”2
Though Kirby is an important ruling on the award of attorney’s fees for meal and rest period claims, it will not end the filing of such cases. Indeed, the Court’s ruling will not preclude the recovery of attorney's fees by plaintiff’s counsel pursuing break claims on a class-wide basis. Although “[t]he general rule is that a party is entitled to an award of attorney fees if there is specific authorization therefor by statute or private agreement…[,][t]here are… three well-established equitable exceptions to the general rule, known as the common fund, substantial benefit, and private attorney general theories.”3 Any of these doctrines may be asserted by a prevailing plaintiff in the class context to justify an award of fees. Also, employers can now expect plaintiff’s counsel to include in their meal and rest period lawsuits claims for which attorney’s fees can be recovered. For example, it is likely they will include claims for unpaid overtime or claims under the Private Attorneys General Act (“PAGA”) tacked along with meal and rest period claims to argue that the majority of their time was devoted to pursuing the overtime and PAGA claims to recover their attorney's fees.