Contributors

Eric P. Weiss

Principal

In California, employees are entitled to recover reasonable attorney’s fees if they prevail on claims against employers alleging violations of the Labor Code. In the recent Court of Appeal opinion in Gramajo v. Joe’s Pizza, a California Court of Appeal was faced with the issue of whether to award excessive attorney’s fees to an employee even though the amount of the verdict was nominal. As shown below, the Court of Appeal sent a message across the bow that excessive attorney’s fees may be recoverable irrespective of the amount of damages.

Facts of the case

Gramajo worked as a delivery driver for Joe’s Pizza from February 2014 to June 2015. In February 2018, Gramajo sued Joe’s Pizza for failure to pay minimum and overtime wages (Lab. Code, §§ 510, 558, 1194), failure to provide rest and meal periods (Lab. Code, §§ 512, 226.7), failure to pay wages due at time of termination (Lab.Code, §§ 201, 202, 203), failure to reimburse for business expenses (Lab. Code, § 2802), and unfair business practices (Bus. & Prof. Code, § 17200).

After nearly four years of litigation and extensive discovery, the matter was set for trial in October 2021. Gramajo sought $26,159.33 in unpaid minimum and overtime wages, missed meal and rest breaks, waiting time penalties, and unreimbursed expenses. After a seven-day trial, the jury found in favor of Gramajo on his minimum wage and overtime causes of action. The jury awarded Gramajo $2.17 in unpaid minimum wages and $3,340 in unpaid overtime wages. In total, Gramajo recovered $7,659.63, consisting of the unpaid minimum and overtime wages; $2,115.59 in statutory interest; $2,100 in waiting time penalties calculated at the daily wage rate of $70 per day for thirty days per Labor Code section 203; $2.17 in liquidated damages; and $100 in statutory penalties.

Thereafter, Gramajo filed a motion for attorney fees in the amount of $296,920 (at a rate of $650/hour) and costs in the amount of $26,932.84 under Labor Code section 1194(a), which entitles prevailing employees to their reasonable litigation costs, including attorney fees. Joe’s Pizza opposed the motion and filed its own motion to tax costs.

The trial court denied Gramajo’s fee request and granted Joe’s Pizza’s motion to tax costs, ultimately awarding Gramajo nothing. In denying Gramajo’s fee request, the trial court relied on Code of Civil Procedure section 1033(a) which gives the trial court discretion to deny litigation costs altogether when it finds the plaintiff failed to take advantage of the efficiency of a limited civil proceeding (action value at $25,000 or less). To this end, the trial court found Gramajo acted in bad faith by artificially inflating his damages figure and including equity claims he never intended to pursue to justify filing the case as an unlimited civil proceeding. The trial court also found the case was severely over litigated, noting Gramajo had propounded 15 sets of written discovery requests and noticed 14 depositions despite only admitting 12 exhibits at trial. Gramajo appealed.

Court of Appeal reverses

The Court of Appeal reversed finding that the trial court erred in relying on section 1033(a) to deny the motion. Rather, the trial court should have decided the motion based on Labor Code section 1194 which takes precedence over section 1033(a). Specifically, the Court of Appeal held (emphasis added): “We hold employees who prevail in actions to recover unpaid minimum and overtime wages are entitled to their reasonable litigation costs under Labor Code section 1194, subdivision (a), irrespective of the amount recovered.”

Key takeaway

The Court of Appeal did not decide whether the amount of attorney’s fees sought be Gramajo was reasonable or excessive. Rather, it remanded the case to the trial court to decide. Regardless, the Gramajo opinion sends a warning to employers that, even if they prevail in reducing the amount of damages sought by an employee, the financial risk of taking a case to trial could be catastrophic since employers may be compelled to pay excessive attorney’s fees to the employee, in addition to the fees and costs the employers will incur to defend the case.