Attorney’s Fees and Costs In Discrimination Litigation

The shifting fees and costs equation favors employees in discrimination cases

Attorney’s Fees and Costs in Discrimination Cases Are Major Factors in Case Evaluation

Attorney’s fees and costs of in California discrimination cases can be a major factor in assessing whether the parties go forward with litigation.  “Costs” are distinguished from “Attorney’s Fees.”  A typical “cost” is the court filing fees, or the charges by a court reporting service to take deposition testimony and provide transcripts.  Other major costs would include expert witness preparation and testimony time;  jury fees and court reporter fees incurred during trial.  A major cost if a matter is arbitrated is the arbitration service administration fee and the arbitrator’s daily rate.  These “costs” can be tens of thousands of dollars over the life of a litigation.

Intelligent appraisal of the “cost/benefit” at any stage of a discrimination lawsuit must account for the rapidly accruing fees and costs as the discrimination case moves from filing, through discovery, early court appearances, summary judgment, and finally trial and appeal.  In the American civil justice system, attorney’s fees are not automatically due to the prevailing party.  The general rule is that fees are recoverable only if there is a contract or statute that allows fees in a particular instance.  In both federal [Title VII and the A.D.E.A. and A.D.A.] and state [California Fair Employment and Housing Act, for example] anti-discrimination statutes generally provide that the prevailing party may recover both attorney’s fees and costs of suit.

Attorney’s fees can quickly become the “tail that wags the dog.”  A case in point is the recent California trial loss by Ellen Pao against Kleiner Perkins for gender discrimination.  The Defense firm in that matter claimed it was owed fees in excess of $900,000.00.   The trial court awarded about $250,000.  When experienced attorneys charge from $350 to $550 per hour, and a case proceeds for months or even years, the fee factor can become a dominant consideration.

Discrimination Cases Shift the Risk of Paying Attorney’s Fees and Costs to the Employer

Employees and employers in discrimination cases therefore are wise to require their counsel to provide an early assessment of fees as one component of early case settlement evaluation.  This cautionary approach is especially indicated for the employer in discrimination cases because state and federal court decisions have shifted the risk for paying of attorney’s fees away from the employee.   That is, different fee and cost rules apply if you are an employer.  An employer who loses a discrimination case is mandated by statute to pay the prevailing employee’s fees and costs.

In contrast, an employee who loses a discrimination case in California under the Fair Employment and Housing Act [“FEHA”] is required to pay the Defendant employers fees and costs of litigation only if the employee proceeded with the case unreasonably, knowing the case lacked probable merit. The Court stated that the usual rule of requiring costs to be reimbursed did not apply in discrimination cases.  Instead the Court applied the same rule to out-of-pocket costs as applied to attorney’s fees.  See California Supreme Court decision in Williams v. Chino Valley Independent Fire District [Filed May 4, 2015] Full Decision.  See also, Christiansburg Garment Co. v. EEOC  434 U.S. 412 (1978) holding that a prevailing defendant can only recover its fees and costs in federal Title VII cases by showing that the plaintiff’s claim was “frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.”

Questions About Fees and Costs to Ask Your Employment Law Counsel in Discrimination Cases

When conferring with your employment law counsel counsel, here are some questions you should ask:

1. If we lose this case, is there a risk I will have to pay the other side’s fees and costs?
2. What are the likely amounts of the fees and costs that I will have to pay if we lose at trial?
3. Is the accrual of fees and costs being factored into our settlement discussions?
4. If I am the employer, what is the likelihood we’ll be able to collect an award of fees and costs even if we win?
5. If I am the employee, do we periodically increase our negotiation demands to recoup he accumulating fees and costs?
6. If I’m the employee, and my attorney is working on a percentage contingency fee, how will the attorney be able to present his or her hourly time in support of a fee claim if we win?
7. If I am the employer, do I have employment practices liability insurance [“EPLI”] coverage, and will it protect me from an award that includes the fees and costs awarded to the employee?
8. If we win, do I get all my actual fees and costs reimbursed, or does the court have discretion to award less?
9. What kind of proof do we present to the court to support our claim for fees and costs, or alternatively, what can we do to show the court the other party has overstated its fees and costs?
10. If I must pay the other parties fees and costs, is that a tax deductible expense?

Conclusion

The scales are tipped in favor of employees in discrimination cases to allow recovery of fees and costs if they win, and to avoid fees and costs if they lose.  The employee will be relieved of attorney fees and costs claimed by the prevailing employer if the employee was at least reasonable in assessing the merits of the case.   In effect, the question is, at the time the case was filed and prosecuted, would a reasonable employee believe he had a chance to win?  The answer is usually “yes,” and the result is that most courts will exercise their discretion to deny a defendant employer’s request for fees.   In California, this rule has recently been extended to include “costs of suit” as well.

Shifting fee and cost risks unevenly between employer and employee in discrimination cases is consistent with established precedent, and advances the laudatory purpose of encouraging employees to challenge discriminatory practices for the good of all.  However, both employers and employees should weigh the fees and costs component in discrimination cases when deciding to litigate.