Over 20 Years Of Dedicated Client Representation

California Supreme Court Says Employees Individual Settlements Of Labor Code Claims Cannot Block Paga Actions

On Behalf of | Mar 13, 2020 | Uncategorized

After California Supreme Court
justice Justice Goodwin H. Liu criticized restaurant chain Reins International California Inc.’s position that a worker who settled his individual labor violation claims could not pursue a Private Attorneys General Act (“PAGA”) action on behalf of other workers back in January 2020 during oral argument, the Court predictably held today that workers who have settled their personal Labor
Code claims are still “aggrieved” under the Private Attorneys General Act because PAGA standing depends on whether their employer committed a violation, and not whether the worker can seek compensation for an injury.

The basic premise behind the
holding is Employer Defendants would never correct the underlying issues, and simply buy off representative Employee Plaintiffs. The California Supreme Court asked in theory every employee could be bought off and asking, “When would it stop?”

During a January 2020 hearing in San Francisco, Justice Goodwin H. Liu said PAGA was created so that workers would not have to rely only on the Division of Labor Standard Enforcement (“DLSE”) (the state agency who enforces these Labor Code violations) to enforce labor laws. However, he said, if employers like the defendant, Reins International California Inc., can pay “outsized settlements” to “essentially pick off individuals” while making the argument that someone else will bring the PAGA suit, PAGA actions will never be pursued.

Reins International’s counsel,
Spencer Skeen Esq. of Ogletree Deakins Nash Smoak & Stewart PC, argued that the state could always bring an enforcement action itself, but another justice snorted, “We all know that doesn’t work.”

Appellant Kim’s counsel, Eric
B. Kingsley Esq. of Kingsley & Kingsley APC, told the justices on Tuesday that this case really is about access to justice and deterring Labor Code violations.

Kingsley argued PAGA allows
workers to “stand in the shoes of the state” and act as an enforcer, but prohibiting workers who settle individual claims from bringing PAGA actions is “manifestly unfair” and could lead to “potentially terrible results,” with individuals receiving windfalls while the violations continue to the detriment of the state [and as this author has observed – the remaining workers].  The Court agreed as it chided Reins for presenting Kim with a “Hobson’s choice” — meaning take it or take nothing — when it offered the deal. The company pressured Kim
to strike a deal by offering it under a mechanism by which he would have been liable for the company’s ensuing costs had he lost or won a judgment on worse terms. It was “hardly fair play” for Reins to then point to that deal to escape the PAGA claim, the court said Thursday.

Kingsley further argued in the January 2020 hearing that employers would benefit by paying out relatively small individual settlements, as opposed to paying the civil penalties under PAGA.

Plaintiff Kim had unfortunately signed an agreement to resolve employment disputes in solo arbitration and of course Reins forced him until solo arbitration. The California Supreme Court previously said PAGA claims are not subject to arbitration agreements, and Kim’s PAGA claim was paused while the dispute played out.

The Los Angeles County Superior Court lifted the stay after Kim settled his solo claims for $20,000, and ruled for Reins on summary judgment, finding Kim lacked standing to pursue the PAGA claim after inking the deal because he was no longer aggrieved. A Second Appellate District panel affirmed, and Kim appealed to the California Supreme Court.

The state high court said Thursday that the lower courts’ rulings are “at odds with the legislature’s explicit definition” of aggrieved employee, which PAGA defines as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” That language “does not require the employee to claim that any economic injury resulted from the alleged violations,” and it “indicates that PAGA standing is not inextricably linked to the plaintiff’s own injury,” the court said.

For employers this means there may be even less incentive to have arbitration agreements and earlier PAGA settlements along with corrective behavior maybe the best choice. Hopefully a decision like this prompts the Company to reexamine its policies and and get into compliance with California law for the underlying mistakes. For employees, if it means the Defendant employer cannot pick off a PAGA representative with a settlement and may not force employees into arbitration agreements, it is a win – win for all involved.

If you have any questions about whether you have been paid properly or paid all minimum wages or asked to work off the clock or believe you have a claim against your employer for any violation of the California Labor Code, please feel free to call us at 949-458-9675 or email Rich Quintilone at  if you have any questions. Alejandro Quinones Esq. [email protected] – yo hablo español.

U.S. District Court Ruling Invalidates AB 51