The California Private Attorneys General Act (PAGA) gives employees the right to sue their employers for alleged violations of the California Labor Code. Employees may maintain claims not only on their own behalf, but also on behalf of other employees.
Even the most law-abiding employers risk receiving substantial penalty sentences should they be found to have violated provisions of the Labor Code. Recent years have seen a cascade of PAGA litigation, prompting courts to provide guidance on some questions. But many questions remain. As we enter 2023, the California Supreme Court is set to rule on three PAGA cases that may have substantial implications for employers.
The three questions the court will address are:
- Will employees who have entered into arbitration agreements with PAGA representative waivers be allowed to process claims of other allegedly aggrieved employees?
- Will employers be allowed to claim that some PAGA claims are unmanageable and therefore unable to proceed representatively?
- How will employers resolve a PAGA case where there is a competing PAGA case with overlapping claims?
PAY Arbitration Waivers
The Supreme Court of the United States issued the viking river decision in June 2022, widely seen as a win for employers. Provides that employers can enforce arbitration agreements in California that require employees to arbitrate individual PAGA claims.
The court also held that once an employee’s individual PAGA claims are bound by arbitration under California law, the employee would not be entitled to bring a representative PAGA claim on behalf of other employees.
Despite viking river is unquestionably favorable to businessmen, it leaves open a series of questions. A critical question is standing, specifically, whether an employee required to arbitrate your individual PAGA claims loses standing under California law to bring representative claims on behalf of other employees. Despite viking river concluded that the employee lost standing to assert the representative PAGA claim once his individual PAGA claim was forced into arbitration, the court made it clear that the question of standing is for the California legislature to decide.
But rather than wait for the California legislature to intervene, the California Supreme Court appears poised to address the issue. In Adolfo vs. Uber Technologiesthe court must decide whether an employee who has been compelled to arbitrate claims under PAGA that are based on Labor Code violations actually suffered by the employee maintains legal standing to bring PAGA claims arising out of events involving other employees in court .
How the court decides this issue will likely have a substantial impact on the PAGA litigation. A decision that the employee retains standing to bring PAGA representative actions on behalf of other employees is likely to viking river irrelevant to employers.
Conversely, a decision that the employee does not have such capacity is likely to help reduce PAGA litigation and provide employers with a tool, in the form of arbitration agreements, to combat PAGA litigation.
Will driveability still be a viable defense?
One defense that employers commonly assert in PAGA cases is that it would be unmanageable to allow prosecution of claims on a large-scale representative basis. For example, where individualized questions predominate, such as whether employees were interrupted during their meal periods or prevented from taking their breaks, the employer may defend itself on the grounds that it would be unmanageable to allow the case to proceed on its behalf. of employees other than the named plaintiffs.
The employer’s argument is that it would require individualized proof that each employee was, for example, interrupted during meal breaks. When there are a significant number of employees, each with unique factual circumstances regarding their own claims, this would result in a large amount of evidence at trial, resulting in chaotic case management. In such circumstances, the employer could argue that the unique nature of individualized claims would make representative prosecution of the entire PAGA claim unmanageable.
California appellate courts that have addressed this issue have reached conflicting conclusions.
in 2021 Wesson vs. Staples, the Office superstoreThe Second District Court of Appeal held that “courts have the inherent authority to ensure that a PAGA claim is adjudicable at trial, including the power to set aside the claim, if necessary, and that this authority is not inconsistent with the PAGA procedures and objectives, or with applicable precedents”.
On the contrary, in 2022 Estrada v. Royalty Carpet Mills, the Fourth District Court of Appeals held that dismissal of a PAGA claim based on manageability would effectively impose a “class action requirement” on PAGA claims that would interfere with PAGA’s purpose as an enforcement mechanism. Consequently, the road the court held that “a court cannot set aside a PAGA claim based on driveability.” He road The court opined that trial courts are not powerless to handle unwieldy PAGA claims. Trial courts may limit the evidence presented and weigh the limited evidence in determining the amount of penalties to award.
The California Supreme Court granted a review to determine whether trial courts have the inherent authority to ensure that PAGA claims are adjudicable at trial, and to vacate or limit such claims if they cannot be adjudicated. How the court answers this question may determine whether the manageability defense remains viable for employers in the future.
How will employers resolve competing PAGA cases?
Employers sometimes find themselves simultaneously defending two or more PAGA cases filed by different employees. Often the claims are the same between cases, and the representative class of employees and time period may overlap. In such circumstances, the employer may want to settle one of the PAGA cases and extinguish the claims being asserted not only in that case, but also in any concurrently litigated cases.
But what happens when the plaintiff in the cold case objects to the settlement in the other case? This is another issue on which the Courts of Appeal are divided.
In Uribe c. Crown Building Maintenance Co., the employer had been defending itself against two competing PAGA cases in two different jurisdictions, brought by two different employees. Both cases alleged that the employer failed to reimburse certain business expenses. After the employer settled with the plaintiff in the latter of the two cases filed, the plaintiff in the first case filed attempted to intervene and challenge the settlement.
The Fourth District Court of Appeal held in 2021 that the plaintiff in the first lawsuit filed, who was not a party to the second settled case, had a pecuniary interest in preserving her own PAGA case that gave her the right to intervene. in the settled case and object to the settlement.
On the contrary, in 2021 Turrieta vs. Lyft, Lyft had been defending itself against three simultaneous PAGA cases. She settled with the actor, Turrieta, who had filed the last of the three cases. The settlement was to cover claims, alleged aggrieved employees, and a period of time that would have effectively extinguished the two plaintiffs’ PAGA claims in the other cases.
The Second District Court of Appeals examined what rights the two challenging plaintiffs had to intervene in the proposed settlement of the Turrieta case. The Court of Appeals held that the status of the two plaintiffs in separate PAGA actions did not confer standing to seek annulment of the trial court’s judgment or to challenge the appeal judgment in the Turrieta case.
The California Supreme Court granted a review in the Turrieta case to decide whether a plaintiff in a PAGA representative lawsuit has the right to intervene, object, or seek to vacate a judgment in a related action. How the court answers this question can have a substantial impact on how employers litigate or attempt to resolve PAGA cases where concurrent litigation is pending.
With these PAGA cases on its docket for 2023, the California Supreme Court clearly recognizes the importance of weighing these important legal issues. What remains to be seen, however, is whether the court’s decisions serve to clarify unanswered questions of law, or simply raise additional questions.
Philip J. Azzara is an attorney with Fisher Phillips in Irvine, California. © 2023. All rights reserved. Reprinted with permission.