1. General Rule: “American Rule” and Its Exceptions
If you’ve ever thought about suing an employer in California, or if you’re an employer defending yourself, one of the biggest questions that comes up is: “Who pays for the lawyer?”
The starting point is the “American Rule.” Under this general rule, each side pays their own attorney’s fees. That means even if you win, you usually cover your own lawyer unless there’s a law, contract, or special exception that says otherwise.
Additionally, under the general “American Rule” codified in Cal Code Civ Proc § 1021, each party typically bears its own attorneys’ fees unless a statute, contract, or law provides otherwise. For example, Cal Code Civ Proc § 1033.5 allows attorneys’ fees as costs when authorized by statute, contract, or law (Cal Code Civ Proc § 1033.5, Segal v. ASICS America Corp., 12 Cal. 5th 651, Martinez v. SAI Long Beach B, Inc., 108 Cal. App. 5th 367). In public interest cases, Cal Code Civ Proc § 1021.5 permits courts to award attorneys’ fees to a successful party if the litigation enforces an important right affecting the public interest and meets certain criteria (Vasquez v. State of California, 45 Cal. 4th 243, 11 CCR 3201).
What does that mean in plain English? Unless there’s a law that specifically allows it, winning a lawsuit doesn’t mean the other side has to pay your attorney. But in employment law, California has several worker-friendly statutes that shift the burden and allow employees to recover their fees if they win.
Example:
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Employee: If Jane sues her employer for unpaid overtime, she can’t automatically demand attorney’s fees unless a statute like Labor Code § 1194 applies.
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Employer: If ABC Corp. defends a lawsuit successfully, it can’t recover attorney’s fees unless there’s a statute or contract allowing it.
2. Labor Code § 218.5 – Wage/Fringe Benefit Claims
When it comes to unpaid wages, vacation pay, or other fringe benefits, California has a very specific rule.
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If the employee wins, the court must award them reasonable attorney’s fees (but only if they asked for it at the very start of the case).
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If the employer wins, the court can only award fees if it finds the employee acted in bad faith — meaning the case was dishonest or abusive.
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Importantly, this doesn’t apply to minimum wage or overtime claims under § 1194 (those are covered separately).
For wage and hour disputes under Cal Lab Code § 218.5, attorneys’ fees may be awarded to the prevailing party if requested at the initiation of the action. However, a prevailing employer can only recover attorneys’ fees if the court finds that the employee brought the action in bad faith. This provision was amended in 2013 to impose this additional requirement, making it more difficult for employers to recover fees in such cases. In contrast, Cal Lab Code § 1194 provides a one-way fee-shifting mechanism, allowing only prevailing employees to recover attorneys’ fees in actions for unpaid minimum wages or overtime compensation (Cal Lab Code § 218.5, Cruz v. Fusion Buffet, Inc., 57 Cal. App. 5th 221)
Why does the law tilt in favor of employees? Because wage disputes often involve relatively small amounts of money, but attorney’s fees can be large. If employees had to pay for their own lawyers no matter what, many wouldn’t pursue claims at all. This statute makes sure workers aren’t priced out of justice.
Example:
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Employee: Sarah sues for unpaid vacation pay. If she wins, she is entitled to her attorney’s fees.
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Employer: If Sarah loses and the court finds she filed her lawsuit maliciously, the employer might recover fees.
3. Labor Code § 1194 – Minimum Wage and Overtime Claims
Minimum wage and overtime cases get even more protection. Under Labor Code § 1194, only the employee can recover attorney’s fees — not the employer.
This “one-way fee shifting” is designed to encourage employees to come forward when they’ve been underpaid. Employers don’t get the same benefit because lawmakers didn’t want workers to be scared away from filing legitimate claims.
Example:
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Employee: John sues for unpaid overtime. If he prevails, he recovers attorney’s fees.
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Employer: If John loses, the employer still cannot claim attorney’s fees.
Imagine an employee wins just a few thousand dollars in unpaid overtime, but the attorney’s bill is $20,000. Without this rule, pursuing the case wouldn’t make sense. That’s why Labor Code § 1194 is such a powerful tool for workers.
4. Labor Code § 2802 – Expense Reimbursement
California law also requires employers to reimburse workers for reasonable business expenses. That means if you have to use your own car, cell phone, or even internet for work, your employer has to pay you back.
If an employer refuses and the employee sues, Labor Code § 2802 allows the employee to recover their attorney’s fees if they win. This helps ensure workers aren’t stuck paying out-of-pocket just to do their jobs.
Example:
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Employee: Maria spends her own money for work-related travel. If she sues and wins, she recovers attorney’s fees.
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Employer: If Maria loses, the employer cannot recover attorney’s fees.
This rule especially matters today, with so many employees working remotely and relying on their own devices and internet connections.
5. Fair Employment and Housing Act (FEHA) – Discrimination/Harassment
FEHA covers discrimination, harassment, and retaliation claims. Attorney’s fees here work a bit differently.
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Courts can award fees to either side, but the rules aren’t the same.
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Employees who win can be awarded fees.
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Employers can only recover fees if the employee’s lawsuit was frivolous, unreasonable, or clearly without merit.
In California employment lawsuits, attorneys’ fees are generally governed by specific statutes and legal principles. Under the California Fair Employment and Housing Act (FEHA), a trial court has discretion to award reasonable attorneys’ fees and costs to the prevailing party. However, a prevailing defendant may only recover attorneys’ fees if the court finds that the plaintiff’s action was frivolous, unreasonable, or groundless when brought, or if the plaintiff continued to litigate after it clearly became so. This asymmetric rule is intended to encourage the enforcement of civil rights laws by protecting plaintiffs from the risk of adverse fee awards in potentially meritorious cases that ultimately do not succeed (Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478, Leek v. Cooper, 194 Cal. App. 4th 399, Cal Gov Code § 12965).
This means employees don’t risk financial ruin if they bring discrimination cases in good faith, even if they don’t ultimately win. Employers, on the other hand, only get fees if the case was clearly abusive or baseless.
Example:
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Employee: Kevin sues for racial discrimination under FEHA and wins. He can recover attorney’s fees.
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Employer: If Kevin’s claim was clearly frivolous, the employer may be awarded attorney’s fees.
6. Labor Code § 1102.5 – Whistleblower Retaliation
California strongly protects whistleblowers — employees who report illegal activity at work.
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If an employee sues under § 1102.5 and wins, the court must award attorney’s fees.
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But, there’s an exception: if the employer proves they would have made the same decision (for example, terminating the employee) even if the whistleblowing hadn’t happened, then no fees are awarded.
This “same-decision defense” ensures that employers aren’t punished unfairly when legitimate business decisions overlap with whistleblowing.
Example:
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Employee: Linda reports safety violations and sues for retaliation. If she wins, she recovers attorney’s fees.
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Employer: If the company proves it would have terminated Linda regardless of whistleblowing, it avoids paying attorney’s fees.
7. Private Attorneys General Act (PAGA)
PAGA is unique. It allows employees to act like “private attorneys general” and sue on behalf of themselves and other workers for Labor Code violations.
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If the employee wins, they can recover attorney’s fees.
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Recent reforms now allow employers to reduce penalties if they quickly fix violations and make employees whole — which includes covering attorney’s fees.
This law has created a wave of litigation in California, and attorney’s fees are often a major factor in settlement negotiations.
Example:
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Employee: Mark brings a PAGA claim for unpaid rest breaks and prevails. He recovers attorney’s fees.
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Employer: If Mark’s employer cures the violation quickly, it still must cover reasonable attorney’s fees as part of restitution.
8. Contractual Fee Clauses
Sometimes the right to attorney’s fees comes from the employment contract itself. Employers often include fee clauses in contracts or arbitration agreements.
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If the contract allows the prevailing party to recover fees, courts will usually enforce it.
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But statutory protections, like those under § 1194, can override a contract if it would unfairly burden employees.
Example:
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Employee: Anna’s contract includes an attorney’s fee clause. If she sues and wins, she may recover attorney’s fees.
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Employer: If Anna sues without merit and the contract provides for attorney’s fees, the employer may recover—unless statutes like § 1194 forbid it.
Court Rules – Timing for Fee Motions
Winning your case is only half the battle. To actually get attorney’s fees, you have to ask for them properly and on time.
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California Rule of Court § 3.1702 lays out how and when to file a fee motion.
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If you miss the deadline (usually the same timeframe as filing an appeal), you can lose your chance to recover fees altogether.
Example:
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Employee: If Brian prevails in his wage claim, his attorney must file the motion for fees on time, or risk losing the right to collect.
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Employer: If a contract allows the employer to seek attorney’s fees, it too must follow these timing rules.
Summary Table
| Type of Claim |
Who May Recover Attorney’s Fees |
Conditions / Limitations |
| Wage/fringe benefit claims (Lab. Code § 218.5) |
Employee / Employer |
Employee must request in complaint; employer only if bad faith shown |
| Minimum wage/overtime (Lab. Code § 1194) |
Employee only |
Employer cannot recover |
| Expense reimbursement (Lab. Code § 2802) |
Employee only |
No fee recovery for employers |
| Discrimination/Harassment (FEHA) |
Employee / Employer |
Employer only if employee’s case was frivolous, etc. |
| Whistleblower retaliation (Lab. Code § 1102.5) |
Employee (mandatory) |
Employer can block with same-decision defense |
| PAGA claims |
Employee |
Employers must cover fees if curing violations |
| Contractual fee clauses |
Depends on contract |
Statutory protections may override |
| Court rules timing (§ 3.1702) |
Both parties, if eligible |
Motions must be filed within deadline |
Highlights & Practical Insights
Employees generally have far more opportunities to recover attorney’s fees than employers. This isn’t an accident — California lawmakers want to make sure workers aren’t discouraged from filing legitimate claims just because they can’t afford a lawyer.
Employers, on the other hand, can usually only recover fees when the employee’s claim was frivolous or brought in bad faith. This prevents companies from using the threat of crushing attorney’s fees to scare employees away from court.
In summary, attorneys’ fees in California employment lawsuits are allowed under specific statutory frameworks, with distinct rules for prevailing plaintiffs and defendants depending on the nature of the claim and the applicable statute (Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478, Cal Gov Code § 12965, Cruz v. Fusion Buffet, Inc., 57 Cal. App. 5th 221).
Strategic takeaway: Fee-shifting rules create strong incentives for employees to pursue valid claims, while limiting employers’ ability to recover fees unless litigation abuse is shown. For employees, this means you shouldn’t be afraid to assert your rights. For employers, it means careful HR compliance and quick resolution of disputes can save a lot of money in the long run.
