SAN FRANCISCO—In a fight over $4,250 in penalties won by a former paralegal, a Northern California plaintiffs firm this week lost an appeal that has it facing a potential six-figure bill to cover the former employee’s attorneys fees.

The First District Court of Appeal on Wednesday actually trimmed the so-called waiting penalty that Danko Meredith P.C. owes former paralegal Taryn Nishiki by $2,000 to $2,250. However, the appellate court upheld an $86,160 in attorney fees award granted to Nishiki by the trial court and ordered the firm to pay her appellate costs and fees.