Missed Meal and Rest Breaks Are Wages For Purposes Of Attorney's Fees Awards Under Labor Code Section 218.5

Fourth District, Division One Remands Cause For Recalculation of Fee Award After Eliminating Punitive Damage Recovery on Appeal.

     We now have an interesting case for labor law practitioners. It centers upon Labor Code section 218.5, which provides that "[i]n any action brought for the nonpayment of wages, ….the court shall award reasonable attorney's fees and costs to the prevailing party if any party to the action requests attorney's fees and costs upon initiation of the action." Brewer v. Premier Golf Properties, Case No. D050686 (4^th Dist., Div. 1 Dec. 3, 2008) (certified for partial publication) confronted some pleading, statutory construction, and 998 offer issues surely faced by labor litigators in this age where wage and hour violations are frequently raised by plaintiffs in their complaints.

     After a jury trial, plaintiff was awarded judgment for (1) $2,646 for meal period wages and $3,314.25 for rest period wages; (2) $4,000 as penalties under Labor Code section 226; (3) $15,300 in penalties under section 1197.1; (4) $956.10 for unpaid wages; (5) $195,000 for punitive damages; and (6) entitlement to subsequently recover attorney's fees and costs pursuant to section 218.5 and routine costs pursuant to Code of Civil Procedure section 1032.

     JNOV/new trial motions were filed, with the trial court granting the new trial motion unless plaintiff agreed to remit to $75,000 in punitive damages—something plaintiff did without waiving her appellate rights.

     In her Complaint, plaintiff pled recovery of amounts mandated under Labor Code section 226.7 (meal and real break violations) and included a request for attorney's fees. Her First Amended Complaint was even more specific in pleading entitlement to costs and fees under sections 210, 218.5, and 226. In the posttrial fee proceeding in which plaintiff sought nearly $150,000 in fees, the trial court disallowed all the fees for the "second chair" attorney (which reduced the fee request to $129,420) and then reduced that amount by one half to allocate out efforts on plaintiff's unsuccessful age discrimination claim—with the final fee award tallying $64,710. Both parties sought review.

     On appeal, Justice McDonald—on behalf of a 3-0 panel of the Fourth District, Division 1—threw out the punitive damage award completely, finding that the penalty schemes preempted any leeway for a further exemplary damage award. The rest of the merits determinations were sustained.

     That winnowed review down to the fee award.

     Employer first argued that Brewer failed to specifically plead fee entitlement in her pleadings. Employer wanted some magic, specific language citing section 218.5. The Court of Appeal found that the general prayer for fees sufficed, but also observed that plaintiff did specifically reference section 218.5 in the First Amended Complaint. No more was required.

     Employer next contended that compensation for denied rest and meal breaks does not qualify as "wages" for purposes of section 218.5 attorney's fees awards. Wrong, said the appellate panel. Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4^th 1094, 1108, 1114 (2007) established otherwise and nothing indicated the decision should not be given retroactive effect.

     Employer then claimed that its section 998 offer for $30,000 barred the fees award because the total of all damages, penalties and interest was short of that. Justice McDonald was skeptical, because that total was $27,599.62—and pre-offer costs (which include fees) had to be added before any shortfall could be confirmed. Because the pre-offer costs only had to exceed about $2,400, it was doubtful this argument would win. However, the appellate court did remand so the lower court could gauge the merits of this argument one way or the other.

     Because the matter was going to be remanded due to the striking of the punitive damage award, the fee award had to be reconsidered. However, the Brewer court did acknowledge that the trial court did use appropriate reductions from the lodestar figure—such as the limited success factor (e.g., winning the wage-hour claims but losing the age discrimination claim). See, e.g., Lyons v. Chinese Hospital Assn., 136 Cal.App.4^th 1331, 1345 (2006); Harman v. City and County of San Francisco, 136 Cal.App.4^th 1279, 1308-1316 (2006). Nevertheless, because the trial court's thinking might have been influenced by the punitive damage award, it was appropriate to remand to the trial judge for purposes of fixing fees in light of the reversal (because the punitive award elimination possibly might alter the lower court's thinking on the "degree of success" factor even more).