In Reid Lester v. Career Bldg. Academy, the Colorado Court of Appeals adopted a legal standard that will virtually assure that a prevailing employee in a statutory wage claim will be awarded attorney’s fees.

Reid Lester (Lester) was the chief operating officer of The Career Building Academy (TCBA), a non-profit corporation. The founder of TCBA promised to pay Lester a salary of $150,000, with half to be paid by TCBA and the other half to be paid by second entity, JHP. TCBA paid him less than $8,000 during his first six months of employment. Lester resigned and filed suit, claiming he had an implied contract with TCBA and JHP and seeking unpaid wages, penalties, and attorney’s fees under theColorado Wage Claim Act (CWCA).

Lester Wins his Wage Claim, But the Court Rejects his Request for Attorney’s Fees

Lester convinced a jury that he had an implied contract with TCBA and awarded him unpaid wages. Addressing the question of whether to award him attorney’s fees, the trial court considered ten factors set forth in a 2010 Court of Appeals case:

(1) the scope and history of the litigation; (2) the ability of the employee to pay an award of fees; (3) the relative hardship to the employee of an award of fees; (4) the ability of the employer to absorb the fees it incurred; (5) whether an award of fees will deter others from acting in similar circumstances; (6) the relative merits of the parties’ respective positions in the litigation; (7) whether the employee’s claim was frivolous, objectively unreasonable, or groundless; (8) whether the employee acted in bad faith; (9) whether the unsuccessful claim was based on a good faith attempt to resolve a significant legal question under the CWCA; and (10) the significance of the claim under the CWCA in relation to the entire litigation.

Based on these factors, the trial court denied Lester’s request for attorney’s fees.

The Court Reverses & Establishes a New Standard for Awarding Attorney’s Fees to Prevailing Plaintiffs

On appeal, Lester requested reversal of the trial court’s ruling against him on attorney’s fees. The Court of Appeals agreed. It stated first that the CWCA itself unambiguously gave the trial court discretion to award attorney’s fees to a prevailing party:

If, in any action, the employee fails to recover a greater sum than the amount tendered by the employer, the court may award the employer reasonable costs and attorney fees incurred in such action . . . . If, in any such action in which the employee seeks to recover any amount of wages or compensation, the employee recovers a sum greater than the amount tendered by the employer, the court may award the employee reasonable costs and attorney fees incurred in such action.

But it noted that the CWCA was silent as to what factors a trial court should consider in exercising that discretion. For those factors, the Court of Appeals turned to the legislative declaration made when the law was revised in 2007. That legislative declaration, said the court, indicated the Colorado General Assembly’s intention to apply to claims for fees by prevailing plaintiffs the same standard that applies to Title VII of the Civil Rights Act of 1964, a federal law that prohibits racial, sexual, and other types of discrimination, harassment, and retaliation.

The Court of Appeals explained that under the Title VII standard adopted by the Colorado legislature, a plaintiff is entitled to her attorney’s fees unless the employer can show that “’special circumstances would render [an award of attorney fees] unjust.’”  Such special circumstances, “may arise when a plaintiff brings the lawsuit for the purposes of delay, or in bad faith; or seeks to harass, embarrass, or abuse another party or the court.” The existence of such factors is “unlikely to exist,” so a decision by a trial to deny a motion for attorney’s fees to a prevailing plaintiff should be “rare and disfavored.

The Court of Appeals then set forth several factors that a trial court may not consider in reviewing a request for attorney’s fees.  An employer cannot establish special circumstances by showing that it acted in good faith, that it is a government, that the employee is capable of paying her own fees, or that it is a non-profit so that an award would impose a financial hardship on it.  

The Court of Appeals held that the trial court did not limit its evaluation of Lester’s attorney fee request to whether special circumstances existed. As a result, it reversed the denial of that request and sent the case back to the trial court for review under the new standard.

What It Means for Employers

A plaintiff who proves that the employer violated the CWCA will receive attorney’s fees except in rare circumstances. Accordingly, the Lester case holds two primary lessons for employers. First, compliance with the law is crucial for an employer to avoid liability and attorney’s fees:

·     Pay current employees correctly and timely under C.R.S. §§ 8-­4-­102, -103, -105, -106;

·     Deduct from employees’ paychecks only those amounts permitted under C.R.S. § 8­-4­-105;

·     When an employee is discharged, timely pay them what is earned, vested, and determinable whether they quit or were terminated involuntarily, C.R.S. §§ 8­-4­-101, -109, -110;

·     Pay striking employees according to C.R.S. § 8-4-108;

·     Post notices and keep records properly under C.R.S. §§ 8-­4-103, -105.5, ­-107, -117;

·     Do not retaliate against current or former employees for asserting CWCA rights. C.R.S. § 8­-4-­120;

·     Comply with any industry-specific requirements. C.R.S. § 8-4-104 (mining); ­-115, -116, -117, & ­119 (field labor contractors); -123 (nursing homes, building management companies).

Second, an employer should include language in its employee handbooks requiring employees to raise issues about their compensation as soon as they become aware of them and stating that the employer will promptly investigate and correct any errors.

Third, Make sure that all managers, especially those running remote offices, are familiar with the CWCA’s provisions or have ready access to someone who does.