Class Action Requirements Do Not Apply to PAGA Representative Actions

Fourth Quarter 2009Newsletters California UPDATE Employment Law

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Under the California Labor Code Private Attorneys General Act (PAGA), an aggrieved employee can bring a lawsuit to recover civil penalties against an employer personally and on behalf of other current and former employees for violations of the Labor Code. The employee must give written notice to both the employer and the Labor and Workforce Development Agency of the alleged Labor Code violation, along with supporting facts and theories. If the Agency fails to respond within 33 days, chooses not to issue a citation or fails to issue a citation within 158 days of the employee's notice, the employee may commence the civil action. Where civil penalties are recovered, the Agency receives 75 percent, and the remaining 25 percent goes to the aggrieved employees.

Recently, the California Supreme Court held that an aggrieved employee who brings a representative action under PAGA may recover civil penalties without satisfying class action certification requirements. In Arias v. Superior Court, the plaintiff alleged various wage and hour violations under the California Business & Professions Code § 17200, California's Unfair Competition Law (UCL), and claimed he was entitled to civil penalties under PAGA. The Supreme Court affirmed the Court of Appeal's decision that determined that although claims brought under the UCL are subject to class action requirements due to Proposition 64, claims under PAGA are not.The court pointed to the language of PAGA in support of its decision.

The Supreme Court disagreed with the defendant's assumption that class action requirements apply generally to any type of representative action. The court also dismissed the concern that other plaintiffs would not be bound by a PAGA finding in favor of the defendant, allowing non-party aggrieved employees to continually sue until one prevailed.The court determined that collateral estoppel would apply to all non-parties for whom the plaintiff was acting as a proxy. Thus, with respect to civil penalties, a PAGA action is akin to an action brought by the government, in which a decision would bind both the government and non-party employees.

Employers should expect that the number of PAGA claims will increase and should therefore be more vigilant in auditing their labor practices and preventing employee claims.