Employment: Lower Court Improperly Denied Fees To Winning Employee At Labor Commissioner Level Where Employer Withdrew Appeal To Superior Court

 

Labor Code Section 98.2 Is Not Symmetrical, Never Intending To Incentivize Employers To File Frivolous Appeals And Then Withdraw Them.

     Royal Pacific Funding Corp. v. Arneson, Case No. G050158 (4^th Dist., Div. 3 July 28, 2015) (unpublished) concerned an employee who won a Labor Commissioner wage claim of $29,500, prompting an appeal to the superior court by employer. Employee engaged legal counsel, who did “some very effective saber-rattling” such that employer withdrew its appeal with prejudice. Employee then moved for attorney’s fees and costs under Labor Code section 98.2, with the lower court denying all fees to employee on the theory that there must be a predicate court award—something which could not occur when the employer withdrew its appeal. (Section 98.2(c) provides: “If the party seeking review by filing an appeal to the superior court is unsuccessful in the appeal, the court shall determine the costs and reasonable attorney’s fees incurred by the other parties to the appeal, and assess that amount as a cost upon the party filing the appeal. An employee is successful if the court awards an amount greater than zero.”)

     The Fourth District, Division 3, in a 3-0 decision authored by Justice Bedsworth, reversed and remanded to the trial court to determine a reasonable fee for employee’s efforts in defending against the employer’s short-lived appeal.

     The trial judge had based her decision on reasoning from Arias v. Kardoulias, 207 Cal.App.4^th 1429, 1433-1434, 1438 (2012), where an employee’s appeal got dismissed on procedural grounds and employer moved for fees, but where the appellate court ultimately concluded that a procedural dismissal could not be equated with a superior court determination of the merits. In symmetrical fashion, the lower court determined the same result should apply to employee appellants.

     According to the 4/3 DCA, the flaw in the lower court’s reasoning was that the Legislature did not intend for section 98.2 to be symmetrical, adding the “employee-is-successful” sentence to subdivision (c) to make clear that an employee was still successful in the appeal even if the employee ended up with a reduced award—as long as it wasn’t zero. “ . . . the Legislature certainly never intended to give employers a chance to whipsaw employees by filing section 98.2 appeals and then withdrawing them. Such a reading of the statute turns the basic purpose of the 2003 amendment on its head. It incentivizes employers to file frivolous appeals and then withdraw them at the last minute so as to inflict gratuitous legal costs on an employee who has been otherwise successful at the Labor Commission level.” (Slip Opn., p. 5.)

     The appellate court panel found further support from other contextual language in section 98.2—“(1) If an employer’s appeal is withdrawn, the employee has already been successful in terms of the appeal because the employee gets to collect the compensation award almost immediately, (2) Alternatively, if the employer never appeals in the first place, the employee is successful because he or she still obtains an enforceable court judgment against the employer. To say, then, that an employee is not “successful” under subdivision (c) when an employer withdraws its section 98.2 appeal is nonsense. The employee gets to keep the money he or she won at the administrative level as if the employee had completely prevailed in a court trial.” (Slip Opn., p. 6.)