KDG Analyzes Recent PAGA and Class Action Court Rulings

The landscape of employment law in California is shifting through both legislative action and Court rulings. At Klein DeNatale Goldner, we keep a watchful eye on all issues that can impact the relationship between employers and workers.

Several court cases have impacted class-action and Private Attorneys General Act (PAGA) claims. Let’s first quickly define those two legal terms. Second, we will outline recent issues brought before the court, the rulings, and how employers might be impacted.

What Is a Class-Action Lawsuit?

A class-action lawsuit enables one or more plaintiffs to file a lawsuit on behalf of a larger group (a class). Class action helps the court to more easily manage lawsuits that could have many class members. Not every class member needs to join the lawsuit by name as a plaintiff but could still benefit from the outcome.

What Is the Private Attorneys General Act?

PAGA enables wronged employees to file lawsuits against their employers for Labor Code violations. They can recover civil penalties on behalf of themselves, other employees, and the State of California. PAGA was enacted in 2004. A PAGA suit can be filed even if the employee has signed an arbitration agreement as part of their employment.

The following cases offer crucial insight for California employers.

Turrieta v. Lyft, Inc. (2021) 69 Cal.App.5th 955: Review Filed 11/10/2021

Issue: Where two different plaintiffs filed separate Private Attorneys General Act (“PAGA”) actions against the same employer, does the plaintiff in one action have standing in the other to vacate or challenge the judgment of the other action on appeal?

Ruling: The Court of Appeals ruled that third-party PAGA plaintiffs lack standing to bring a motion to vacate or appeal the settlement. The Court explained that PAGA plaintiffs in another action are not aggrieved parties because it is the state’s rights and not those of the third parties that will be affected by a parallel settlement.

Uribe v. Crown Building Maintenance Co. (2021) 70 Cal.App.5th 986: Rehearing Denied 10/26/2021

Issue: Does an unnamed class member have standing as an aggrieved party to vacate or challenge the approval of a settlement of a PAGA claim on appeal?

Ruling: The Court of Appeals found that an unnamed class member who was granted leave to intervene and was a plaintiff in a related PAGA action had the right to appeal the approval of the settlement. The Court reasoned that because the appellant had an “immediate, pecuniary, and substantial” interest in advancing their own PAGA action (which would have been extinguished by claim preclusion if the settlement was upheld), the appellant had standing to challenge the settlement’s PAGA component.

Distinguishing Uribe and Turrieta

Without context, the holdings of Uribe and Turrieta appear to directly conflict with one another. Fortunately, the Court in Uribe explains the procedural distinctions between the cases that account for the discrepancy in its published opinion. In Turrieta, the trial court denied the third-party employees’ requests to intervene in the action, a decision which was upheld on appeal. As a result, the reviewing Court concluded that because it is the state’s rights that would be affected by the settlement in a PAGA action and not those of the appellants, they did not qualify as “aggrieved employees” under the statute and lacked standing to attempt to overturn the judgment. In contrast, the trial court in Uribe granted the employee’s request to file a complaint in intervention. Upon completing the necessary procedural steps, the employee became a party to the action. As a result, because their own PAGA cause of action would be extinguished by claim preclusion if the settlement was affirmed, the Court determined they had the appropriate standing necessary to attempt to overturn the judgment.

Practical Implications for Employers: When multiple, similar PAGA claims have been filed, it is important to assess the status of all claims to create optimal strategies to protect the employer.

Rojas-Cifuentes v. Superior Court (2020) 58 Cal.App.5th 1051

Issue: Did an employee’s PAGA notice sufficiently state the facts and theories required to satisfy the administrative exhaustion requirements under the Act?

Ruling: The Court of Appeals held that the plaintiff’s PAGA notice sufficiently stated the specific provisions of the Labor Code alleged to have been violated and facts and theories to support the alleged violation. The employer argued that the plaintiff’s allegation of systematic failure to keep accurate time and payroll records and detailing of several labor code sections violated by this conduct was insufficient to meet the administrative exhaustion requirements. The Court disagreed and held that a PAGA notice which provides facts and theories to support at least some allegations in the action is sufficient to meet the plaintiff’s burden.

Practical Implications for Employers: The bar for the “facts and theories” requirement under Lab. Code, § 2699.3 is low. To satisfy the pleading requirements, an aggrieved employee must only provide sufficient facts and theories to show the relevant state agency that there is any basis for the allegations.

Wilson v. La Jolla Group (2021) 61 Cal.App.5th 897

Issue: Did the trial court err in denying class certification on the grounds that individual issues did not predominate because of varied employee experience?

Ruling: The Court of Appeals held that the trial court did not err in denying certification based on non-wage statement claims, but that it did err in determining that common questions did not predominate on a wage statement claim. The Court reasoned that because plaintiffs were able to make their own schedules and work as much or as little as they desired, employee experiences varied too greatly to allow for common proof of meal and rest break violations. The Court did find, however, that individual issues did not predominate on a claim for failure to provide adequate wage statements to employees as this centralized practice would be amenable to class-wide proof.

Salazar v. See’s Candy Shops, Incorporated (2021) 64 Cal.App.5th 85: Review Denied and Ordered Not to be Officially Published 08/11/2021

Issue: Did the trial court err in denying class certification on the grounds that individual issues would predominate?

Ruling: The Court of Appeals held that the trial court did not err in denying class certification because it reasonably determined that individual issues would predominate, and that the plaintiff failed to provide a trial plan that offered a manageable method to determine class-wide liability without individual inquiry. The plaintiff presented time record evidence that she believed could establish liability through common proof. However, the Court determined that because these records showed that 24% of shifts over 10 hours included a second meal period, the trial court reasonably concluded that individual testimony would be necessary to demonstrate liability.

Certified Tire & Service Centers Wage & Hour Cases (2021) 66 Cal.App.5th. 190: Review Denied and Ordered Not to be Officially Published 10/13/2021

Issue: Whether the trial court erred in concluding that the employer’s Technician Compensation Program (TCP) did not violate the minimum wage and rest period requirements as set forth in Wage Order 4?

Ruling: The Court of Appeals held that the TCP did not violate minimum wage and rest break requirements. Plaintiffs argued that the formula used in calculating an employee’s base rate under the TCP violated California’s minimum wage and rest period requirements by engaging in impermissible wage borrowing. The Court disagreed, finding that under the TCP, while an employee’s base rate of pay would end up being less at the end of a pay period when they devoted a higher percentage of time to tasks that did not generate production dollars as opposed to tasks that did, all time an employee spent on the clock and all required rest periods were directly compensated at an hourly rate that exceeded the minimum wage.

Practical Implications for Employers: Alternative compensation programs designed to incentivize workplace efficiency are permissible. However, employers may not take higher compensation contractually due for one set of hours and spread it over other, otherwise uncompensated, or undercompensated hours to satisfy minimum wage requirements.

Johnson v. Maxim Healthcare Services, Inc. (2021) 66 Cal.App.5th 924: Review Denied 11/10/2021

Issue: May an employee, whose individual claim is time-barred, may still pursue a representative claim under PAGA?

Ruling: The Court of Appeals held that the fact that an employee’s individual claim is time-barred does not strip the employee of their standing to pursue PAGA remedies. The Court reasoned that under the California Supreme Court’s recent decision in Kim v. Reins International California, Inc. (that an “aggrieved employee” has standing to pursue a PAGA claim, irrespective of whether that employee maintains a separate Labor Code claim), the expiration of the statute of limitations for an individual claim does not bar an employee from pursuing a PAGA action.

Practical Implications for Employers: An aggrieved employee’s PAGA claim may continue to exist even after the statute of limitations for their individual claims has expired.

Hildebrandt v. Staples the Office Superstore, LLC (2020) 58 Cal.App.5th 128

Issue: Does the filing of a class action with similar claims entitle an employee to the benefit of class action tolling rules for their individual action?

Ruling: The Court of Appeals held that the application of the tolling rule of class actions to individual claims is fair when previously filed class actions provide the defendant adequate notice of the claims and generic identities of potential plaintiffs during the applicable limitations period. In its reasoning, the Court of Appeals relied on California Supreme Court’s decision in Jolly v. Eli Lilly & Co. There, the Court held that such tolling is necessary to protect the efficiency of the class action device because otherwise, potential class members may be forced by the statute of limitations to file their individual actions while the class certification proceedings are still pending (thus defeating the efficiency and economical purposes of the class action).

Practical Implications for Employers: In some circumstances, if a class certification is denied, the statute of limitations is paused between the commencement of the action and the denial of class certification. This “stopping of the clock” allows purported class members to either intervene in the surviving individual action or bring their own. As a result, employers should be aware that any employee who can be found to have reasonably postponed filing their own claims because of the class action may receive additional time added to their statute of limitations.

Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal.App.5th 746: Review Filed 10/19/2021

Issue: Do trial courts have inherent authority to ensure that PAGA claims will be manageable at trial and strike those that are not?

Ruling: The Court of Appeals found that trial courts have the inherent authority to ensure that PAGA claims can be fairly and efficiently tried, that courts may strike those claims they find are unmanageable, and that as a matter of due process, the defendant’s right to litigate available affirmative defenses should be accounted for in the manageability determination.

Lawson v. Grubhub, Inc. (9th Cir. 2021) 13 F.4th 908: A Case to Watch

Issue 1: Whether California Proposition 22 (providing that if certain conditions are met, “app-based drivers” are independent contractors) applies retroactively.

Ruling 1: The Court of Appeals for the Ninth Circuit held that Proposition 22 does not apply retroactively. The Court reasoned that California has a settled presumption against interpreting statutes and ballot propositions as having retroactive applications unless expressly provided for in the legislation, which Proposition 22 does not.

Issue 2: Whether the Supreme Court’s decision in Dynamex Operations W. v. Superior Court (which revised the applicable test for determining if a worker is an independent contractor and was ruled to apply retroactively) changes the determination of Plaintiff’s status?

Ruling 2: The Court of Appeals for the Ninth Circuit declined to apply the test itself. Instead, it remanded the issue to the district court to apply the revised test.

Issue 3: Whether the ABC Test of Dynamex applies to expense reimbursement claims retroactively?

Ruling 3: The Court of Appeals for the Ninth Circuit declined to answer the question. It reasoned that because the California Courts of Appeal have not squarely decided whether the Dynamex test applies to expense reimbursement claims retroactively, the Court determined that the trial court should decide in the first instance whether the test applies retroactively here.

Williams v. RGIS, LLC (2021) 70 Cal.App.5th 445

Issue: Does the FAA (Federal Arbitration Act) preempt a California state law rule that says employees cannot contractually waive their right to bring a representative action under PAGA?

Ruling: The defendant employer attempted to argue that the FAA, which requires courts to enforce agreements for individual arbitration, preempted the state rule prohibiting PAGA waivers. The defendant also argued that the United States Supreme Court’s decision in Epic Systems Corp v. Lewis (holding that an employee who agreed to individualized arbitration could not assert claims on behalf of other employees under the FLSA or other federal class action procedures) abrogated the state rule prohibiting PAGA waivers. The Court rejected both of these arguments holding that neither the decision in Epic Systems nor the FAA preempted the California rule prohibiting PAGA waivers.

Practical Implications for Employers: Even where an employee enters into a valid and binding arbitration agreement for their individual claims, an employer may still be forced to litigate PAGA claims.

Santos v. El Guapos Tacos, LLC (Cal. Ct. App., Nov. 30, 2021, No. H046470) 2021 WL 5626375

Issue: Did the trial court err in determining that plaintiffs’ PAGA notice was deficient for failing to reference other aggrieved employees?

Ruling: The Court of Appeals determined that the representative plaintiff’s PAGA notice provided fair notice to the Labor & Workforce Development Agency (LWDA) and defendants of the representative claims. The defendant employers argued that the PAGA notice did not inform the LWDA “of the claims of any other alleged similarly situated but unidentified individuals” or that the plaintiff “intended to pursue this matter on behalf of these unnamed individuals.” The Court rejected this argument. The Court explained that because the notice did not refer to any claims as “my” or “ours,” did not allege violations of the labor code flowing from an individual termination, did not suggest that the violations were isolated, referenced “other acts by employer” without limiting the acts solely as against either plaintiff, and stated that the plaintiffs wished to proceed with their PAGA claims as authorized by the California Labor Code, the notice sufficiently alerted the LWDA and defendants that there were other aggrieved employees implicated in the representative action.

Practical Implications for Employers: A plaintiff’s PAGA notice does not need to include magic words to be sufficient to put an employer and the LWDA on notice of a PAGA claim. If it can be reasonably inferred from the notice that the injuries alleged were not isolated to the named individual, it is likely to be considered effective notice.

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