This article is part of our 2024 Labor & Employment Roundup. To read the other articles, click below:
Ever since California enacted the Private Attorneys General Act (PAGA) in 2004, employers have faced a barrage of PAGA lawsuits, either as stand-alone actions or as part of wage and hour class actions.
Although PAGA claims can seem similar to class actions in that they allow one individual to recover on behalf of others, PAGA claims are unlike class actions in several ways. Importantly, PAGA actions are subject to a one year statute of limitations, and allow the recovery of civil penalties which can multiply quickly: $100 per employee, per pay period, for an initial violation and $200 per employee, per pay period, for a subsequent violation. A “violation” is an employer’s failure to follow a provision of the California Labor Code.
In August 2023, the California Court of Appeals issued two decisions that will further muddy the waters when it comes to PAGA litigation. One decision limits the power of PAGA settlements to limit future similar lawsuits, while the other strengthens a PAGA plaintiff’s ability to intervene in and object to overlapping PAGA settlements.
What this means for employers: California employers and employers who do business in the state should review their wage and hour practices to ensure compliance with state and federal law. Otherwise, they risk a PAGA claim – or, for many employers, more than one claim – brought by separate PAGA plaintiffs, sometimes alleging overlapping violations of the Labor Code.
PAGA authorizes “aggrieved employees” to sue their employers, stepping into the shoes of the Attorney General of the State of California. PAGA suits are brought on behalf of the State of California, and the State recoups a large portion of the recovery obtained by the “aggrieved employee” and their attorneys, as explained further below.
Before filing a PAGA lawsuit, an employee must give notice of the alleged Labor Code violations to the California Labor & Workforce Development Agency (LWDA). If an employee prevails on his or her claims, they can recover civil penalties for each pay period in which a Labor Code violation occurred. Seventy-five percent of a PAGA judgment goes to the LWDA, and 25 percent is awarded to the group of aggrieved employees. Often, these PAGA letters contain a laundry list of possible wage and hour violations, since a plaintiff’s lawyer would be loath to miss one.
Similar to class actions, PAGA settlements require court approval. Once approved, the settlement generally bars lawsuits by other employees over the same or similar PAGA claims. However, two recent appellate decisions weakened the ability of PAGA settlements to serve as a bar to other PAGA claims alleging the same violations of the Labor Code: LaCour v. Marshalls of California LLC and Accurso v. In-N-Out Burgers.
In LaCour, aggrieved employees brought PAGA claims alleging various Labor Code violations, including that employees were not reimbursed for work uniform costs, and for personal phone and vehicle use. The trial court dismissed the PAGA claims on the grounds that they had been released in a previous PAGA settlement.
The Court of Appeals, however, reversed on the grounds that the LWDA notice in the previous action did not support a finding that the claims in the previous action could have been released. This was despite the fact that the court approved settlement in the previous action broadly released PAGA claims that were, or could have been, alleged. The LaCour ruling effectively narrows the decision in Moniz v. Adecco USA, Inc., where the court concluded that a previous PAGA settlement in fact could release similar claims even if they “were not specifically listed in the PAGA notice.”
The second case, Accurso, also involved a claim for failure to reimburse business expenses. There, the employer, In-N-Out Burger, was facing six overlapping PAGA lawsuits. In-N-Out settled Accurso with the goal of also eliminating the other lawsuits. However, two of the other plaintiffs asked to intervene and object to the settlement because it would dispose of their claims.
The trial court rejected the intervention on the grounds that the third-party plaintiffs did not have “a personal interest in the PAGA claims being prosecuted by Accurso, but rather the interest lies with the State [of California], as the real party in interest.” The Court of Appeals disagreed, sending the case back with instructions to reconsider the request to intervene. This decision broke with the decision in Turrieta v. Lyft, Inc., which found intervention inappropriate because a PAGA plaintiff has “no personal interest in the PAGA claims” that are brought on behalf of the State of California.
How Will This Impact California Employers?
These cases are wins for PAGA plaintiffs, who now have increased grounds to object to, and possibly narrow, overlapping PAGA settlements – meaning that employers could be faced with ongoing PAGA litigation in other actions even after they have settled a PAGA lawsuit with one plaintiff. We have already seen how many plaintiff law firms file copycat wage and hour class actions, and these two PAGA decisions will likely embolden plaintiffs to bring PAGA lawsuits, despite one or more preexisting PAGA cases on the same issues.
Plaintiffs will be far more likely than before to ride the coattails of a preexisting case, aiming to get a cut of that settlement without spending the time or money to litigate the matter. Employers are advised to consult with experienced employment counsel to understand the impact one settlement could have on other PAGA cases, since a decision whether or not to include all PAGA plaintiffs in settlement discussions is best made before a settlement is reached.
What Should Employers Consider Based on These Decisions?
Employers with PAGA lawsuits should retain defense counsel with experience structuring PAGA settlements to guard against duplicative/copycat claims. Defense counsel should also stay apprised of the latest developments in the ever-changing landscape of PAGA litigation.
For all employers, whether they have pending PAGA cases or not, the best defense is robust wage and hour law compliance. Employers with California employees should consider:
- Conducting regular audits of employee time and payroll records for wage and hour compliance.
- Reviewing and updating wage and hour policies, particularly policies that are repeat PAGA targets: meal and rest breaks, business expense reimbursements, and timekeeping.
- Train managers, particularly front-line supervisors, on California wage and hour law, as a written policy is only as good as the managers implementing it.
If you have any questions or want to know more about the potential impact of these changes on your business, please reach out to one of JMBM’s Labor & Employment Attorneys.
About JMBM’s Labor & Employment Practice
JMBM’s Labor and Employment attorneys counsel businesses and management on workplace issues, helping to establish policies that address problems and reduce job-related lawsuits. We act quickly to resolve claims and aggressively defend our clients in all federal and state courts, before the Department of Labor, the NLRB, and other federal, state and local agencies, as well as in private arbitration forums. We represent employers in collective bargaining negotiations and arbitration.
This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.