Daily Blast - March 13, 2020 - Lewis Brisbois Bisgaard & Smith LLP

Employees and the State Score a Win On Standing to Bring PAGA Class Actions

The Legislature anointed “aggrieved employees” with authority to pursue civil remedies on the state’s behalf for certain Labor Code violations. (Lab. Code, § 2699.) Today, the California Supreme Court decided in Kim v. Reins International California, Inc. that even though an aggrieved employee settled and dismisses their individual claims, they retain standing to pursue PAGA remedies under the Labor Code as the state’s authorized representative. The court held, on this issue of first impression, that “[s]ettlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies.” (Slip Opn., p. 1.)

In Kim, the plaintiff sued his former employer in a putative class action, alleging various Labor Code violations including failure to pay wages and overtime, to provide meal and rest breaks, to provide accurate wage statement, and waiting time penalties. After the plaintiff accepted defendant’s §998 offer and dismissed his individual claims, only the PAGA claim remained to be resolved. The trial court granted summary adjudication in favor of defendant, concluding Kim was no longer an “aggrieved employee” with standing to pursue the PAGA claims. The Supreme Court reversed.

The Supreme Court interpreted Labor Code section 2699’s requirement that the plaintiff acting as the state’s representative in pursuing PAGA claims be an “aggrieved employee” to mean an employee who has suffered a violation, not an injury. It did so relying upon the language of the statute, the statutory purpose supporting PAGA claims, and the overall statutory scheme. The court also noted that civil penalties available under PAGA have a different purpose from damages; damages are intended to be compensatory and to make one whole, while civil penalties are intended to punish the wrongdoer and deter future conduct. (Slip Opn., pp. 9-10.)

The court further reasoned that a PAGA claim, although representative in nature, is different from a class action. (Slip Opn., pp. 10-11.) Plaintiffs act only as the state’s representative or proxy; there is no individual component to a PAGA claim. (Id. at p. 11.) The court looked at the broader statutory scheme in deciding the employer’s interpretation runs counter to the entire scheme. In the court’s view, the employer’s standing interpretation would allow employers “to avoid paying any penalties to the state simply by settling with individual employees,” who would then be precluded from receiving a share of penalties. (Id. at p. 12.)

The opinion also contains a discussion of the legislative history of PAGA and examines and rejects the employer’s claim preclusion and retraxit arguments. A copy of the slip opinion is attached.