The California Supreme Court published an opinion on March 12, 2020 regarding the Private Attorney General’s Act (PAGA). The Court addressed the following question: Do employees lose standing to pursue a claim under PAGA? The Court provided the following answer: No.
In Kim, an employee was misclassified as an exempt employee, and the plaintiff filed an individual cause of action for several Labor Code violations, including for civil penalties under PAGA. The employee was compelled to arbitrate their “individual claims,” and the PAGA litigation was delayed until arbitration was complete. The employer offered to settle all of the employee’s individual claims, and the employee accepted that settlement offer. It was the employer’s understanding that once the employee settled their individual claims, the employee was no longer considered an “aggrieved employee” with standing to bring a PAGA claim.
Since PAGA claims are based on statutes, the Court’s conclusion that “PAGA standing is not lost when representatives settle their claims for individual relief,” is based on its interpretation of (1) the language in the statute, (2) the underlying purpose of the statute, and (3) the legislative intent.
The Court responded to the employer’s interpretation by saying that in order to satisfy the statutory definition of “aggrieved employee,” there is no requirement that the employee “claim that any economic injury resulted from the alleged violations.” If the Legislature intended for an employee’s PAGA standing to be limited, the Court believes that the Legislature would have included that language in the statute.
The Court then went on to make a distinction between wage and hour violations that are brought as individual claims versus PAGA claims. According to the Court’s opinion, individual claims are brought to pursue damages for an injury, allowing for the plaintiff to be restored and made whole. On the other hand, PAGA claims are brought to impose civil penalties for a violation, enabling the state to deter future conduct. Therefore, the Court concluded that “a PAGA claim is not derivative of, or dependent on an individual claim for relief.”
Overall, the Court’s decision tied back to its understanding of the goal and purpose of PAGA. The “sole purpose” of the Legislature’s enactment of PAGA was “to augment the limited enforcement capability of the LWDA by empowering employees to enforce the Labor Code as representatives of the Agency.” The Court stated that the interpretation that settlement of individual claims would result in a lack of standing to bring PAGA claims “would allow employer to reduce their liability for civil penalties, without state oversight and contrary to PAGA’s goal of strengthening Labor Code enforcement.”
While this update from the California Supreme Court may cause some difficulties for employers and employees who are looking to settle individual claims for wage and hour violations, all hope should not be lost. In light of this new decision from the Court, it is anticipated that there may be a push for new legislation that would amend the definition of “aggrieved employee” to allow for PAGA claims to disappear once an employee accepts settlement for their individual claims. If you are in the midst of settling individual claims with an employee that could also be pursued as a PAGA claim, please reach out to one of the attorneys at Palmer Kazanjian today to discuss your options.