Dane-Elec Corp sued it’s employee, Bodokh, for money due on a promissory note. Bodokh cross-complained for unpaid wages. The corporation prevailed on all claims and sought attorney fees pursuant to the promissory note agreement. The Court of Appeal reversed an award of fees to the corporation, reasoning that when an employer prevails on a good-faith claim for unpaid wages, Labor Code section 218.5 prohibits the enforcement of a provision for prevailing party attorney fees on an inextricably intertwined contract claim:
Labor Code section 218.5, an attorney fee-shifting statute in actions for nonpayment of wages, prohibits a prevailing party employer from recovering attorney fees unless the trial court finds the employee brought the wage claim in bad faith. This appeal presents an issue regarding the effect of Labor Code section 218.5 on a prevailing party employer’s right to recover contract-based attorney fees from an employee. Specifically, we address whether an employer may recover attorney fees incurred in successfully defending a wage claim, found not to have been brought in bad faith, when the wage claim was inextricably intertwined with a contract claim for which the employer would otherwise be contractually entitled to recover attorney fees. … We hold that unless the trial court finds the wage claim was brought in bad faith, Labor Code section 218.5, subdivision (a) (section 218.5(a)) prohibits, as a matter of law, an award of attorney fees to a nonemployee prevailing party for successfully defending a wage claim that is inextricably intertwined with a claim subject to a contractual prevailing party attorney fees provision. To the extent the wage claim and the contract claim are inextricably intertwined, section 218.5(a)’s prohibition on recovering attorney fees controls over the contractual attorney fees provision.
Full opinion is here.
