New Trial Required Before Labor Code Section 98.2(c) Becomes Operative Against Employee

   An employee that has a wage claim against an employer may file a claim with the Labor Commissioner or may file a suit for breach of contract in Superior Court. Claims adjudicated by the commissioner do not provide for attorney fees. If either party is unsatisfied with the commissioner’s decision, an appeal may be taken to the Superior Court.

   However, Labor Code section 98.2, subdivision (c) provides that if a party files an appeal in the superior court seeking review of the Labor Commissioner’s decision and is unsuccessful, the court shall determine the reasonable attorney 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 subsection specifically provides that an employee is successful on appeal if the court awards an amount greater than zero.

   What is the rule when an employee appeals and the appeal is dismissed on jurisdictional grounds because the appeal was not timely and the employee did not, therefore, achieve an award greater than zero in the Superior Court?

  In Arias v. Kardoulias the court was confronted with this question. The commissioner awarded Arias $6,319.69 in unpaid wages. Unsatisfied with the award, Arias appealed. The appeal was dismissed on jurisdictional grounds because it was untimely. The superior court considered Arias unsuccessful on appeal, because she did not receive an award greater than zero on appeal, and assessed $6,395 in attorney fees and costs against her.

   The appellate court reversed, noting that, unlike an appeal in a civil action, the appeal of the commissioner’s decision to the superior court nullifies the decision, and the superior court conducts a new trial of the wage dispute. The trial court hears the matter, not as an appellate court, but as a court of original jurisdiction, with full power to hear and determine the wage claim as if it had never been before the commissioner.

  Section 98.2, subdivision (c) is not a prevailing party fee provision, but a one-way fee-shifting scheme that penalizes an unsuccessful party who appeals the commissioner’s decision. If an employer unsuccessfully appeals, i.e., does not nullify the commissioner’s decision following a new trial in the superior court, the employee is entitled to recover attorney fees and costs. If an employee appeals, however, the employer is not entitled to attorney fees and costs if the employee receives an award greater than zero on the wage claim following a new trial in the superior court.

  A dismissal of the appeal from the commissioner’s decision on jurisdictional grounds is not the equivalent of the superior court’s determination, after conducting a trial de novo, that the employee is entitled to “zero.” An employee presents an unmeritorious appeal only if the superior court, upon a trial de novo, reaches the merits of the wage claim and concludes the employee has no right to recover unpaid wages. However, when an appeal is dismissed on jurisdictional grounds, the superior court has had no occasion to make that determination.

  Unlike the dismissal of a civil action, the dismissal of Arias’s appeal only precluded a new trial on her wage claim; her award of unpaid wages was not thrown out or nullified. The employer remains liable for $6,319.69 in unpaid wages. The trial court’s assessment of attorney fees and costs could only stand if the order of dismissal concluded that Arias had no right to those unpaid wages. Therefore, section 98.2, subdivision (c) does not become operative against an employee unless the employee has a new trial in the superior court on the wage claim.