In Villalva v. Bombardier Mass Transit Corp., employees Mark Villalva and Bobby Jason Yelverton initially filed a claim for unpaid wages relating to on-call pay with the Labor Commissioner’s office, who denied their claim and ruled in the employer’s favor. On appeal in superior court, the employees were awarded unpaid wages and attorney’s fees. The California Court of Appeal affirmed the superior court’s order, holding that Labor Code section 98.2 does not preclude the prevailing party to an appeal following a Berman hearing from recovering attorney’s fees under generally applicable attorneys’ fee provisions of the Labor Code.
Background
In actions for unpaid wages, an employee may either: (1) file suit directly in court or (2) seek administrative relief from the Labor Commissioner through a "Berman hearing" which provides an informal, streamlined process of resolving wage disputes. Once the labor commissioner issues an order at the conclusion of a Berman hearing, either party may appeal the decision to the superior court for de novo review (a review that does not afford any weight to the results of the Berman hearing). If the appealing party is unsuccessful in superior court, the prevailing party is entitled to attorney’s fees and costs against the unsuccessful appellant. Labor Code § 98.2. Section 98.2 is silent as to whether successful appellants are likewise entitled to attorney’s fees.
Appellate Court Clarifies Attorney’s Fees for Successful Appellants
In Villalva v. Bombardier Mass Transit Corp., plaintiffs worked as train dispatchers who were required to be “on-call” one weekend a month. The employees initially filed a wage claim with the Labor Commissioner’s office, seeking overtime wages (Labor Code § 1194) and wage statement penalties (Labor Code § 226) for unpaid on-call time. The labor commissioner denied the claims in their entirety, and the employees appealed to the San Diego Superior Court. Following a bench trial, the superior court awarded the employees $140,000 in back wages and penalties, and $200,000 in attorney’s fees and costs. The employer disputed only the award for attorney’s fees, contending that Labor Code section 98.2 is the exclusive method for obtaining attorney’s fees in Berman appeals. Section 98.2 provides that a party seeking appeal of a Labor Commissioner award is required to pay the other parties’ fees and costs if the appellant is unsuccessful on appeal, but defines “success” for employees as anything greater than zero. This statute therefore largely operates to discourage appeals by the employer.
The California Court of Appeal concluded that an employee who successfully appeals a Berman hearing order, and prevails in superior court, is entitled to attorney’s fees and costs. In state court actions for unpaid wages, prevailing plaintiffs are entitled to attorney’s fees and costs under Labor Code sections 218.5, 226, and 1194. The court held that the legislature did not intend for section 98.2 to displace these generally applicable fee provisions for prevailing plaintiffs. The purpose of the “unsuccessful” appealing party fee provision in section 98.2 is to discourage meritless and unwarranted appeals (mostly as to employers). The court observed that adopting the employer’s interpretation—limiting section 98.2 to only operate against unsuccessful appellants—would discourage meritorious appeals and may discourage employees from pursuing the Berman procedure, at all, for fear that it will create a potential disadvantage in the event of an adverse administrative ruling.
Takeaways for Employers
The court’s ruling favors employees by assuring that attorney’s fees are recoverable in the event that the employee elects to appeal the Labor Commissioner’s adverse order. The ruling also places Berman appellants on the same footing as plaintiffs who initially filed in state court by clarifying that generally applicable fee provisions to prevailing plaintiffs under the Labor Code are applicable whether the employee initially commenced the wage dispute administratively or in state court. This decision, coupled with Labor Code section 98.2, provides added incentives for employees to pursue appeals of adverse administrative rulings following a Berman hearing.
