Practice Areas - PAGA Litigation
What is PAGA?
The Labor Code Private Attorneys General Act of 2004 (“PAGA”) (Lab. Code, §2698 et seq.) is a unique California law that authorizes “aggrieved” employees to represent the state in actions for civil penalties against their employers. As the state’s representative, the plaintiff pursues civil penalties for the alleged Labor Code violations suffered by all similarly “aggrieved” employees, not only for the violations they themselves have suffered. In this way, a PAGA suit is much like a class action and can result in liability in the tens of millions of dollars. The law was enacted in 2003 to address staffing limitations that rendered the government incapable of effectively enforcing California’s Labor Code. In the past two decades, thousands of new LWDA notices have been filed annually.
What is the difference between a PAGA action and a class action?
PAGA actions often pose a greater threat to employers than class actions for one simple reason: unlike a class action, a PAGA action cannot be neutralized by an arbitration clause. Whereas an effectively drafted arbitration clause in an employment contract will limit a plaintiff to an individual action and bar class claims entirely, the same clause can, at best, slow the progress of a PAGA action. Due to a combination of rulings by the California and U.S. Supreme Courts, a PAGA plaintiff may be compelled to arbitrate their individual claim, but may thereafter pursue the “representative” portion of the claim in court, on behalf of all similarly aggrieved employees, irrespective of any agreement to arbitrate. Some plaintiffs have even successfully bypassed the individual arbitration stage and proceeded directly to the second, representative phase of the action in court by disavowing their individual claims entirely—a practice known as a “headless” PAGA action.
PAGA and class actions differ in more subtle ways as well. Because a PAGA plaintiff acts on behalf of the State of California, a prerequisite to a PAGA suit is the filing of a notice letter with the LWDA. This permits the LWDA to determine whether it will pursue the case itself. PAGA claims are subject to a one-year statute of limitations period as well. But unlike a class action plaintiff, who must prove several elements to achieve class certification—numerosity, commonality, typicality, adequacy, predominance, and superiority—these requirements have been applied to PAGA plaintiffs only loosely.
In practice, these distinctions may have little relevance from an employer’s perspective, as PAGA and class claims are often brought together in a single action.
What happens after an employer has received a PAGA notice letter?
Litigation. The receipt of a PAGA notice letter typically means that litigation is imminent. Indeed, a PAGA plaintiff may file a class action lawsuit at or around the same time as the PAGA notice letter, and subsequently amend the complaint to add PAGA claims.
Cure Period. While PAGA contains several provisions that enable an employer to “cure” violations and avoid some or all liability for civil penalties, the “cure” procedures may be onerous and subject to challenge by the plaintiff. Some of the “cure” provisions require employers to act swiftly upon receipt of the PAGA notice letter. For instance, a small employer must submit a proposal to cure the alleged violations within 33 days after it receives the PAGA notice. Another provision allows 60 days from the date of receipt of the PAGA notice to take “all reasonable steps to prospectively be in compliance with all provisions identified in the notice” in exchange for reduced penalties.
Arbitration. For employers who have inserted arbitration clauses into their employment contracts, the first step in any lawsuit is to move to compel arbitration of the plaintiff’s claims. The plaintiff may voluntarily submit their individual claims to arbitration without the need of a contested motion. While the individual claims are arbitrated, the representative PAGA claims are stayed. The arbitration then proceeds much like an individual lawsuit, culminating in a hearing before the arbitrator. If the arbitrator determines that the employee suffered one or more Labor Code violations, the employee qualifies as “aggrieved” and may proceed to litigate the representative PAGA claims in court, on behalf of all similarly aggrieved employees.
Settlement. PAGA cases are typically resolved short of trial via settlement, with or without the assistance of a mediator. The parties may employ experts to calculate the value of the case, meaning the total dollar amount of damages and penalties available to the plaintiff. The settlement amount will be a percentage of that value.
Trial. Rarely, a PAGA action may proceed to trial. A pure PAGA action without other types of claims will be tried before a judge in a bench trial. If the action includes other claims that are triable before a jury, there may be a jury trial, but the judge will still decide the amount of the civil penalties, if any, to be imposed.
For more information, please contact attorney Tyler Dosaj at tyler@dosajfirm.com or (213) 310-1905.
