Appeal A Labor Commissioner Award With Caution

In California, when an employee feels he or she has not been paid wages due, often the employee files a wage claim with the Division of Labor Standards Enforcement (“Labor Commissioner”) rather than filing a lawsuit in court.  If the wage claim is not voluntarily settled by the parties, the Labor Commissioner will conduct a hearing and issue an award.  That award becomes a binding judgment unless it is appealed by either party to the Superior Court.  If appealed, the court will conduct a trial of its own, and decide the issue without regard to how the Labor Commissioner decided it.  In order to discourage appeals, the legislature amended California Labor Code section 98.2(c) a few years ago to provide that if an appealing party is “unsuccessful in the appeal,” the court shall determine the reasonable attorneys’ fees and costs incurred by the other parties to the appeal and assess that amount as a cost upon the party filing the appeal.  The law goes on to state that an employee is successful on appeal “if the court awards an amount greater than zero.”  Thus, if the employee is awarded $50,000 by the Labor Commissioner, the employer appeals and the Superior Court finds that the employee is entitled only to $1.00 (a “win” for the employer in anyone’s book), the employer will have to pay the attorneys’ fees and costs of the employee (in addition to its own) as the losing party.  This law has certainly chilled many employers’ desires to file appeals after losing Labor Commissioner hearings.  It also has incentivized employers to fight harder and smarter at the Labor Commissioner level, so as to increase their chances of winning and therefore not needing to file an appeal.  On July 26, 2012, the California Court of Appeal handed down a case (Arias v. Kardoulias) which interpreted Section 98.2(c) in a novel situation, where the employee was awarded approximately $6,000 by the Labor Commissioner, and the employee, not the employer, appealed.  But, the employee’s appeal was filed too late, and so the Superior Court dismissed it on jurisdictional grounds.  Because the employee lost the appeal, the court awarded attorneys’ fees to the employer.  The Court of Appeal reversed, however, holding that Section 98.2(c) does not become operative unless the Superior Court has jurisdiction to conduct a trial on the merits of the employee’s wage claim.  Because the employee’s appeal was filed too late, the court had no jurisdiction to hear it, and thus no attorneys’ fees were due to the employer.  This case represents yet another small step toward the erosion of employer’s procedural rights in wage claim proceedings.  — Adam K. Treiger