Court Opinion

ID: 9784112
Source: CourtListenerOpinion
Date Created: 2023-08-30 20:38:00.839074+00
Date Added: 2024-06-11T07:35:49.263267
License: Public Domain

*374KENNARD, J., Concurring and Dissenting.
An employee who has not received wages when due may either bring a lawsuit against the employer or file a wage claim with the Labor Commissioner, who issues a decision after an informal hearing known as a Berman hearing. If the employee elects to file a wage claim, Labor Code section 98.2 permits either party to “appeal” from the Labor Commissioner’s decision to the superior court. That court then conducts a trial and issues a decision in which the Labor Commissioner’s decision carries no weight at all.
Labor Code section 98.2 further provides that the party who brings the appeal must pay the other party’s attorney fees if the appealing party is “unsuccessful in the appeal.” Departing from established precedent, the majority holds that, for purposes of this fee-shifting provision, an appeal is unsuccessful if the superior court judgment is not more favorable to the appealing party than the Labor Commissioner’s decision. Because this construction of Labor Code section 98.2 is a radical departure from past decisional authority, the majority declines to apply it to this case.
I agree with the majority’s disposition, which is consistent with past decisional authority, but I disagree with its construction of Labor Code section 98.2, which is to be applied in future cases.
I
As relevant here, Labor Code section 98.2 provides:
“(a) Within 10 days after service of notice of an order, decision, or award the parties may seek review by filing an appeal to the . . . superior court, in accordance with the appropriate rules of jurisdiction, where the appeal shall be heard de novo. . . .
“(b) Whenever an employer files an appeal pursuant to this section, the employer shall post an undertaking with the reviewing court in the amount of the order, decision, or award. . . .
“(c) 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. . . .” (Italics added.)
The first decision construing Labor Code section 98.2 was Triad Data Services, Inc. v. Jackson (1984) 153 Cal.App.3d Supp. 1 [200 Cal.Rptr. 418]. *375There, the Labor Commissioner awarded an employee $2,275 for wages and $2,310 for waiting time penalties, which are statutorily required whenever an employer’s failure to pay wages on time is willful. The employer appealed to the municipal court, which reduced the wage award to $1,631 and disallowed the waiting time penalties, but nonetheless awarded the employee an additional $1,000 in attorney fees. The employer appealed to the superior court appellate department, which rejected the employer’s claim that attorney fees were erroneously awarded. The court reasoned that because the appeal of the Labor Commissioner’s decision is actually a trial de novo, the success of the appeal is measured by the normal prevailing party standard. Under that standard, the employee was the prevailing party because she had recovered a net judgment in her favor.
Finding this reasoning persuasive, the Court of Appeal in Cardenas v. Mission Industries (1991) 226 Cal.App.3d 952 [277 Cal.Rptr. 247], which also involved an employer appeal, adopted the same construction of Labor Code section 98.2’s attorney fee provision. This interpretation of Labor Code section 98.2, which I here refer to as the Triad/Cardenas rule, has been settled law since 1984.
II
With this background in mind, I review the basic facts of this case.
Plaintiff Timothy L. Smith was an employee of defendant Rae-Venter Law Group (the Firm). After he resigned, Smith claimed the Firm owed him wages for four weeks of unused vacation and reimbursement for certain business expenses. The Firm refused to pay these amounts.
Smith submitted a claim to the Labor Commissioner, who notified the Firm. After an unsuccessful attempt at settlement, the Labor Commissioner filed an administrative complaint on Smith’s behalf. In addition to the vacation pay and expense reimbursement issues, the complaint alleged that the Firm had unlawfully deducted its unemployment insurance expenses from Smith’s pay. Smith had been unaware of these unlawful deductions before the Labor Commissioner discovered them during a review of the Firm’s wage records.
The Berman hearing resulted in an award to Smith of $8,878.57, consisting of $6,865.31 for unused vacation time and unlawful unemployment insurance deductions, $632.94 for interest, and $1,380.32 for business expense reimbursement. The hearing officer refused to award waiting time penalties, which are statutorily required whenever an employer willfully fails *376to pay wages on time, because the hearing officer found that the Firm’s failure to timely pay Smith’s wages was not willful.
Smith appealed the Labor Commissioner’s decision. After a trial de novo, the superior court awarded the same amount as the Labor Commissioner, except that the court also awarded interest on the business expense reimbursement. Like the Labor Commissioner, the superior court declined to award waiting time penalties, finding that the Firm’s withholding of wages was not willful. The Firm sought attorney fees' in the amount of $32,000, arguing that Smith’s appeal was unsuccessful because, apart from additional interest that the Labor Commissioner lacked authority to award, Smith did not recover more than the Labor Commissioner had awarded him. Applying the Triad/Cardenas rule, the court denied the motion, concluding that, because he was the prevailing party in the trial de novo, Smith had been successful in his appeal.
The Firm appealed, contending that the superior court had erred in denying its claim for attorney fees. Smith cross-appealed, contending that the superior court had erred in denying his claim for waiting time penalties. The Court of Appeal ruled for the Firm, holding that Smith was not entitled to waiting time penalties because the Firm’s failure to timely pay wages was not willful, and that the Firm was entitled to attorney fees because Smith did not recover more than the Labor Commissioner had awarded him. Breaking with settled law, the Court of Appeal expressly rejected the Triad/Cardenas rule.
This court granted Smith’s petition for review.
Ill
To determine whether Smith must pay the attorney fees that the Firm incurred in defending his appeal, this court must construe Labor Code section 98.2. The aim of statutory construction is to ascertain and give effect to the intent of the Legislature that enacted the statute. (Esberg v. Union Oil Co. (2002) 28 Cal.4th 262, 268 [121 Cal.Rptr.2d 203, 47 P.3d 1069]; People v. Gardeley (1996) 14 Cal.4th 605, 621 [59 Cal.Rptr.2d 356, 927 P.2d 713].) A court begins by considering the words of the statute because they are usually the most reliable indicator of legislative intent. (Esberg v. Union Oil Co., supra, at p. 268; see also Holloway v. United States (1999) 526 U.S. 1, 6 [119 S.Ct. 966, 969-970, 143 L.Ed.2d 1].) “The words, however, must be read in context, considering the nature and purpose of the statutory enactment.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 378-379 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) If uncertainty exists, a *377court should consider the consequences of competing interpretations, choosing the one whose consequences are most harmonious with the statute’s purposes. (Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989) 49 Cal.3d 408, 425 [261 Cal.Rptr. 384, 777 P.2d 157].)
The words “unsuccessful on the appeal” in Labor Code section 98.2 are ambiguous. Usually, an appeal is deemed successful only if it results in an improvement of the appellant’s position. Under this interpretation, which the majority adopts for use in future cases, the success of an appeal from a wage-claim decision of the Labor Commissioner is determined by comparing the superior court’s judgment with the Labor Commission’s award.
The difficulty with this reasoning is that an appeal under Labor Code section 98.2 is not an appeal in the usual sense. It is not a review of the Labor Commissioner’s decision for error or abuse of discretion (see Leone v. Medical Board (2000) 22 Cal.4th 660, 666 [94 Cal.Rptr.2d 61, 995 P.2d 191]); instead, it is “‘“a trial anew in the fullest sense’”” in which the Labor Commissioner’s decision is “ ‘entitled to no weight whatsoever’ ” (Post v. Palo/Haklar & Associates (2000) 23 Cal.4th 942, 948 [98 Cal.Rptr.2d 671, 4 P.3d 928]). Because an appeal under Labor Code section 98.2 reopens all issues, as if the Labor Commissioner’s decision did not exist, it may be more appropriate to measure a party’s success in the superior court proceeding as it is measured in ordinary civil actions for purposes of making an award of costs, by deciding which party is the prevailing party. Under this interpretation, which is the Triad/Cardenas rule, an employee’s appeal of a wage-claim award is successful.,if the superior court’s judgment is in the employee’s favor, and an employer’s appeal is successful if the superior court’s judgment is not in the employee’s favor. (See Code Civ. Proc., § 1032, subd. (a)(4) [defining “prevailing party”].)
Which of these competing interpretations is most consistent with the purposes and policies that the Legislature intended Labor Code section 98.2 to further? There are three policies to consider. Underlying all procedures for resolving wage claim disputes is the overriding legislative policy to encourage employers promptly to pay wages when due. As this court has noted, “ ‘[p]ublic policy has long favored the “full and prompt payment of wages due an employee.” ’ ” (Cuadra v. Millan (1998) 17 Cal.4th 855, 871 [72 Cal.Rptr.2d 687, 952 P.2d 704], quoting Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837 [187 Cal.Rptr. 449, 654 P.2d 219].) Also at issue is the legislative policy to encourage use of Berman hearings to achieve final resolution of wage disputes. (See Cuadra v. Millan, supra, at p. 869 [stating that “the purpose of the Berman hearing procedure is to avoid recourse to costly and time-consuming judicial proceedings in all but the most complex *378of wage claims”]; accord, Lolley v. Campbell (2002) 28 Cal.4th 367, 372 [121 Cal.Rptr.2d 571, 48 P.3d 1128].) Finally and most directly linked to the attorney fee provision of Labor Code section 98.2, there is a policy to discourage frivolous and meritless appeals from the decisions of the Labor Commissioner after Berman hearings.
As the Labor Commissioner points out in an amicus curiae brief filed in this court, an employer can narrow the issues that the superior court considers in a wage dispute appeal by making an unconditional payment, before the appeal hearing, of part or all of the amount that the Labor Commissioner has awarded.
Consider first how the two competing interpretations of Labor Code section 98.2 affect the policy favoring prompt payment of wages due. The Triad/Cardenas rule promotes this policy by encouraging employers to pay all or part of the Labor Commissioner’s award, because by doing so the employer narrows the issues to be litigated in the superior court proceeding to those in which the employer is most likely to prevail, thereby increasing the employer’s chances of being the prevailing party in that proceeding. The majority’s comparison test, on the other hand, does nothing to encourage the employer to pay any part of the Labor Commissioner’s award. Simply by appealing, the employer can require the employee to again prove every component of the employee’s wage claim, and the employee’s right to attorney fees on the appeal will not depend on which party is the prevailing party in this full new trial, but instead on whether the judgment is more or less favorable to the employee than the Labor Commissioner’s award.
Consider next the policy of encouraging employees to use the Berman hearing procedure to resolve their wage claim disputes. The majority’s comparison test does not serve this policy. An employee who elects not to file a wage claim, and instead proceeds directly to superior court to settle a wage dispute, can obtain an attorney fee award simply by being the prevailing party (that is, recovering a net judgment for any of the amount claimed). (Lab. Code, §§218.5, 1194.) But if the employee first uses the Berman hearing procedure by filing an administrative wage claim, and the employer appeals the Labor Commissioner’s award, the employee must prove the wage claims in superior court as if the employee had filed in superior court in the first instance, and the employee can obtain an attorney fee award only by recovering as much or more than the Labor Commissioner awarded. If the superior court’s judgment is less than the Labor Commissioner’s award, the employee’s attorney fees, which may well exceed the amount of wages recovered, will be nonrecoverable. In this way, the majority’s comparison test puts employees who use the Berman hearing procedure in a worse *379position than employees who proceed directly to court, thus discouraging use of the legislatively favored administrative process for resolving wage claims.
Consider finally the policy of discouraging frivolous and meritless appeals from Labor Commissioner decisions. Both the majority’s comparison test and the Triad/Cardenas prevailing party test effectively discourage meritless appeals. The majority’s test may be marginally more effective at discouraging employee appeals, and the prevailing party test may be marginally more effective at discouraging employer appeals, but neither test has a clear advantage when both sorts of appeals are considered.
Under the majority’s comparison test, an appealing employee must pay not only his or her own attorney fees, but also the employer’s attorney fees, unless the employee, after relitigating all components of the wage claim, obtains a recovery greater than the Labor Commissioner’s award. Under the Triad/Cardenas prevailing party test, in contrast, an appealing employee must pay not only his or her own attorney fees, but also the employer’s attorney fees, unless the employee can prevail on those issues and components of the wage claim that the employer continues to dispute. By paying part or all of the Labor Commissioner’s award, the employer can narrow the issues to be litigated in superior court and thereby increase its own chances of being the prevailing party. Knowing that their own attorney fees must be paid out of the recovery, and that they will also have to pay the employer’s attorney fees unless they prevail on the issues that the employer chooses to litigate, employees will be discouraged from appealing most Labor Commissioner awards under either test.
Similarly, under the majority’s comparison test, an appealing employer must pay not only its own attorney fees, but also the employee’s attorney fees, unless the employee’s superior court judgment is less than the Labor Commissioner’s award. Under the Triad/Cardenas prevailing party test, in contrast, an appealing employer must pay not only its own attorney fees, but also the employee’s attorney fees, unless the employer can prevail on those issues and components of the wage claim that it continues to dispute. Knowing that its own attorney fees must be paid out of the recovery, and that it will also have to pay the employee’s attorney fees unless it prevails on the issues it chooses to litigate, an employer will be discouraged from appealing Labor Commissioner awards in most instances.
In summary, neither test has a clear advantage in discouraging meritless appeals. But the established Triad/Cardenas prevailing party test is more effective in furthering the other two legislative policies at issue: encouraging prompt payment of wages due and encouraging use of administrative Berman hearings rather than superior court proceedings to resolve most wage disputes.
*380I am not persuaded by the majority’s analogy to the legislative schemes for judicial arbitration (Code Civ. Proc., § 1141.10 et seq.) and settlement offers (id., § 998). For one thing, the language of those provisions (expressly requiring a “more favorable” result) shows that the Legislature knows how to require a comparison test when that is what it wants. The language of Labor Code section 98.2 (requiring that the appealing party be “unsuccessful”) is significantly different, suggesting that the Legislature intended something other than a comparison test. “When the Legislature uses materially different language in statutory provisions addressing the same subject or related subjects, the normal inference is that the Legislature intended a difference in meaning.” (People v. Trevino (2001) 26 Cal.4th 237, 242 [109 Cal.Rptr.2d 567, 27 P.3d 283].) In addition, those schemes are distinguishable from the Labor Code provisions governing wage claims because they do not concern a sensitive public policy like the prompt payment of wages, nor a policy comparable to the legislative policy in favor of administrative resolution of wage" claim disputes.
For these reasons, the Legislature most likely intended that courts should use the established prevailing party test, rather than the majority’s more-favorable-result test, to determine entitlement to attorney fees under Labor Code section 98.2.