Employment, Special Fee Shifting Statutes, Undertaking: 1/4 DCA Affirms Labor Code § 98.2 Attorney Fees Award In Favor Of Employees Retaining Labor Commissioner’s Award After Employer’s Notice Of Appeal Dismissed

Appeal To Superior Court Of Labor Commissioner’s Ruling Was Dismissed For Employer’s Failure To Post The Required Undertaking Or Otherwise Obtain A Waiver Of Same.

            Labor Code section 98.2(c) provides for costs and reasonable attorney’s fees against the unsuccessful party appealing a decision of the Labor Commissioner to the superior court.  Rather than a standard prevailing party fee provision, section 98.2 is a fee-shifting statute that penalizes an unsuccessful party who appeals the Labor Commissioner’s decision.  It is meant to be a disincentive to appeal the Labor Commissioner’s decisions and discourage meritless appeals of wage claims.  Under section 98.2, an employee who is awarded any amount greater than zero from the superior court is considered successful. 

            In Cardinal Care Management, LLC v. Edgardo Afable et al., Case Nos. A154062 and A155229 (1^st Dist., Div. 4 April 20, 2020) (published), seven employees successfully brought administrative proceedings against their former employer and its sole member for unpaid wages and penalties.  The Labor Commissioner awarded them more than $2.5 million – collectively – with employer liable for full amount and sole member liable for over $2.2 million.

            When employer and sole member appealed to the superior court, they claimed financial inability to post the required undertaking in the amount of the award.  The trial court allowed them to file petitions for relief from the required bond, and also allowed them to file their appeals conditioned upon the appeals being stricken if the petitions were denied – which is exactly what happened.

            Employer and sole member were unable to prove a financial inability to post the required bond.  Rather, employees were able to show that employer/sole member had resources to post the bond, and had transferred some real properties – with a collective value exceeding the amount of the required undertaking – in an effort to avoid judgment.

            Dismissal of the appeal triggered a section 98.2(c) award of $16,700 in fees in favor of employees.  Employer and sole member appealed – arguing abuse of discretion and due process violations in challenging the superior court’s dismissal of their appeals, and arguing they were not “unsuccessful” on appeal for purposes of the subsequent section 98.2 award of attorney’s fees as their appeals were dismissed on jurisdictional and procedural grounds as opposed to being dismissed on the merits.

            The 1/4 DCA bought none of their arguments on appeal.  Employer and sole member were required to post an undertaking or show they were entitled to waiver before proceeding with the appeal in the superior court, and had failed to do either – hence the dismissal of their appeals.

            As to the award of attorney’s fees, the 1/4 DCA, relying on the reasoning in Arneson v. Royal Pacific Funding Corp. 239 Cal.App.4^th 1275 (2015), found the employees entitled to section 98.2(c) fees as the outcome of the employer's/sole member’s notices of appeal was that the employees retained not only an amount more than zero, but the full amount of the Labor Commissioner’s award to them – meaning the appeals were clearly unsuccessful.