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.

San Francisco Superior Judge Ethan Schulman, sitting pro tem on the First District, wrote that the firm had “only itself to blame” for running up attorneys fees in a case where it suffered “only a relatively modest loss.”