Posts belonging to Category PAGA

Johnson v. Maxim Healthcare Services, Inc.: Statute of Limitations on Individual Claim No Bar to Aggrieved Employee Standing Under PAGA

In Johnson v. Maxim Healthcare Services, Inc., Cal. Ct. App. 4th Dist., No. D077599, July 21, 2021 (“Johnson”) (slip op. available here), the California Court of Appeal addressed whether an employee whose individual claim is time-barred may still pursue a representative claim under the Labor Code Private Attorneys General Act (“PAGA”) (Cal. Lab. Code § 2698, et seq.). The courtheld the fact that the individual claims of a PAGA representative may be time-barred does not nullify the alleged Labor Code violations or strip her of her standing to pursue PAGA remedies. Slip 7. Johnson illustrates that the facts necessary to confer standing under PAGA are only that a plaintiff must have suffered at least one of the Labor Code violations on which the PAGA claim is based and have been employed by the alleged violator. Cal. Lab. Code § 2699(c). Standing under PAGA does not depend on the continued viability of the plaintiff’s individual claims under the Labor Code.

While employers may cry foul based on the appearance that Johnson revives time barred claims to confer PAGA standing, it does not. Johnson necessarily follows the California Supreme Court’s decision in Kim v. Reins International California, Inc., 9 Cal.5th 73 (2020). Johnson also reflects the statutory reality that a “PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties.” Slip op. at 4.

In Kim, the California Supreme Court held that an aggrieved employee who settled and dismissed his individual Labor Code claims does not lose standing to pursue a PAGA claim. Kim, 9 Cal.5th at 84. Relying on Kim, the Johnson court reflected that to be an “aggrieved employee” under PAGA a plaintiff must be a person “‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” Slip op. at 6 (quoting Kim, 9 Cal.5th at 83-84). Kim held that a plaintiff who is an “aggrieved employee” does not lose standing by settling his Labor Code claims and accepting compensation for his injury. Id. Following Kim, the Johnson court found that “the fact that Johnson’s claim is time-barred places her in a similar situation as a plaintiff who settles her individual claims or dismisses her individual claims to pursue a stand-alone PAGA claim.” Id. at 7.

To be sure, Johnson differs from Kim in that the plaintiff’s individual claims in Kim were not time-barred when she initially filed her PAGA action. However, that is a difference without a distinction under the California Supreme Court’s interpretation of the PAGA. PAGA standing does not depend on maintaining an individual Labor Code claim. Slip. op. at 7. As the Court has stated, every PAGA claim is “a dispute between an employer and the state.” Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 384, 386 (2014). Furthermore, “[r]elief under PAGA is designed primarily to benefit the general public, not the party bringing the action.” Slip op. at 4 (citing Arias v. Superior Court, 46 Cal.4th 969, 986 (2009)).

Considered within the statutory framework, whether a PAGA representative’s individual claims are time-barred is irrelevant. As long as the statutory prerequisites for maintaining a PAGA action are met, the plaintiff has standing to pursue the PAGA claims as the proxy or agent of the state. Arias, 46 Cal.4th at 986. As Johnson observed, “[t]he rule from Kim is an ‘aggrieved employee’ has standing to pursue a PAGA claim, irrespective of whether that employee maintains a separate Labor Code claim.” Slip op. at 7.

Authored by:
Robert Friedl, Senior Counsel

Winns et al. v. Postmates Inc.: Postmates Fails to Deliver PAGA Claims to Arbitration in Another Epic Challenge to Iskanian

In Winns et al. v. Postmates Inc., Cal. Ct. App. 1st Dist., No. A155717, July 20, 2021 (“Winns”) (slip op. available here), the California Court of Appeal held that Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018) (“Epic Systems”) does not overrule the California Supreme Court’s opinion in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) (“Iskanian”), which held that representative action waivers are unenforceable.

The plaintiffs in Winns worked for Postmates as couriers. Their Fleet Agreement with Postmates contained a broad arbitration agreement, including a representative action waiver. The agreement contained an opt-out provision, but none of the plaintiffs submitted opt-out forms. Slip op. at 3. The plaintiffs’ operative complaint alleged individual and class claims under the Labor Code and Unfair Competition Law, including that Postmates illegally withheld wages, took gratuities given to couriers, and misclassified couriers as independent contractors. The plaintiffs also alleged representative claims under the PAGA for which they sought civil penalties. Id. at 3-4.

Postmates initially filed a typical motion to compel arbitration – seeking to arbitrate the plaintiffs’ individual claims and stay their PAGA claim pending the outcome of arbitration. Slip op. at 4. However, after the United States Supreme Court decided Epic Systems, Postmates requested that the plaintiffs also be compelled to arbitrate their PAGA claim for civil penalties. Postmates’ theory was that Epic Systems implicitly overruled the California Supreme Court’s opinion in Iskanian, to the extent Iskanian held that PAGA waivers in arbitration agreements were unenforceable. Id.

The trial court granted Postmates’ motion to compel arbitration with respect to the plaintiffs’ individual claims. However, as to the plaintiffs’ PAGA claim, the court concluded that Epic Systems did not compel the plaintiffs to arbitrate the PAGA claim because Epic Systems “addressed only the question of whether class or collective action waivers were enforceable under the FAA.” Slip op. at 5. It“did not address the enforceability of waivers of representative actions, such as those brought under PAGA.” Id. The trial court concluded that “representative action waivers remain unenforceable under Iskanian.” Id. Postmates appealed.

On appeal, the first important question was whether the opportunity to opt out of the arbitration agreement and the representative action waiver, which the plaintiffs did not exercise, affected the rule of non-waiverability in Iskanian. Slip op. at 7. Postmates argued that Iskanian did not apply to bar these waivers because they were not “a mandatory condition of a courier’s employment.” Id. Postmates relied on language in Iskanian, 59 Cal.4th at 360, stating “that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.” Id.

The Court of Appeal rejected the argument. It explained that “Iskanian’s holding that a PAGA waiver was unenforceable was premised on the public policy rationale that a PAGA waiver improperly circumvents the Legislature’s intent to empower employees to enforce the Labor Code as agency representatives and harms the state’s interest in enforcing the Labor Code.” Slip op. at 7. Moreover, “Iskanian did not turn on how the worker entered into the arbitration agreement, or the mandatory or voluntary nature of the worker’s consent to the agreement.” Id. Thus, under Winns, an employer cannot evade Iskanian’s holding that PAGA representative action waivers are unenforceable by virtue of an opt out option.

Postmates’ principal argument, however, was that Iskanian’s PAGA waiver rule cannot survive Epic Systems and its progeny. The Court of Appeal found the argument unavailing. Slip. op. at 8. This is not surprising because “California courts have uniformly rejected the argument that Epic Systems overruled Iskanian.Id. at 9-10 (citing cases).

The well-accepted reasoning behind these cases is the same. In Epic Systems, the Court did not decide whether representative actions like PAGA claims can be compelled to arbitration. Therefore, it did not “overrule” Iskanian. For a court to be bound by a decision of the United States Supreme Court, rather than the California Supreme Court, the United States Supreme Court must have decided the same question differently. Slip op. at 8 (citing Correia v. NB Baker Electric, Inc., 32 Cal.App.5th 602, 619 (2019)).

As the Winns court explained, “the U.S. Supreme Court did not decide or consider whether a worker may waive a right to bring a representative action on behalf of a state government.” Slip op. at 9. It follows, therefore, that “the Court’s reasoning in Epic Systems did not address the basis for our Supreme Court’s decision in Iskanian, namely, that a PAGA action is not an individual dispute between private parties but an action brought on behalf of the state by an aggrieved worker designated by statute to be a proper representative of the state to bring such an action.” Id. This situation – particularly including the involvement of the state, which is not party to any arbitration agreement – presents issues very different from those before Epic Systems.

Accordingly, the Winns court found that it was bound by the doctrine of stare decisis to follow the California Supreme Court’s decision in Iskanian that PAGA waivers are invalid under state law. It affirmed the trial court’s order denying Postmates’ petition to compel arbitration of the plaintiffs’ PAGA civil penalty claim. Slip op. at 15.

Authored by:
Robert Friedl, Senior Counsel

Crestwood Behavioral Health, Inc. v. Sup. Ct.: PAGA Venue is Proper Anywhere Aggrieved Employees Suffer Labor Code Violations, Says CA Ct. of Appeal

In Crestwood Behavioral Health, Inc. v. The Superior Court of Alameda County, Maricris Fragoza, Real Party in Interest, Cal. Ct. App. 1st Dist., No. A160523, Feb. 17, 2021 (“Fragoza”) (slip op. available here), the California Court of Appeal decided “a significant and recurring issue of first impression.” What is the proper venue for an action under the Labor Code Private Attorneys General Act (“PAGA”) (Cal. Lab. Code § 2698, et seq.), where the representative plaintiff suffered Labor Code violations in one county, but filed her PAGA action in another county where other “aggrieved employees” were employed?

In Fragoza, the employer (“Crestwood”) filed a petition for writ of mandate seeking a ruling from the Court of Appeal that venue is properly located in the county where the representative plaintiff worked, but not other counties where other aggrieved employees worked. The Court of Appeal came to the opposite conclusion, stating, “We hold that venue is proper in any county in which an aggrieved employee worked and Labor Code violations allegedly occurred.” Slip. op. at 5 (emphasis added).

The plaintiff worked for Crestwood in its Solano County facility, and suffered Labor Code violations in Solano County. However, the plaintiff filed her PAGA action in Alameda County, where other “aggrieved employees” suffered violations, because Crestwood also had a facility in Alameda County. Crestwood argued that, although the plaintiff could seek PAGA penalties for Labor Code violations against other aggrieved employees, the only proper venue to file her PAGA action is Solano County, where the violations against Fragoza herself occurred. The argument was based on Cal. Code Civ. Proc. § 393, which provides that for recovery of a penalty, venue is proper in “the county in which the cause, or some part of the cause, arose.”

The court stated that the problem with the defendant’s argument is that it “misapprehends the purpose of Fragoza’s personal allegations.” Slip. op at 6. The plaintiff’s allegations that she suffered Labor Code violations are necessary to establish her standing as a PAGA representative, not to establish venue. Id. “Once she established standing, Fragoza is suing as a proxy for the state, not as an individual. [Citation omitted] She has no individual claim.” Id. at 6-7. It follows that, under section 393, Crestwood’s liability or “some part of the cause [] arose” in Alameda County because Labor Code violations occurred there, at Crestwood’s facility. Id. at 7. Hence, the Court of Appeal’s holding that in PAGA actions, venue is proper in any county in which aggrieved employees allegedly suffered Labor Code violations.  

Employers’ advocates have bemoaned this decision as a pro-employee PAGA ruling that promotes “forum shopping” by employees. It is not, because Fragoza simply applies long-standing venue rules to the realities of the PAGA. The Supreme Court of California holds that PAGA actions have no individual component; PAGA plaintiffs may pursue civil penalties “only as the state’s designated proxy, suing on behalf of all affected employees.” Kim v. Reins International California, Inc., 9 Cal.5th 73, 87 (2020). Under section 323, the proper venue for a PAGA action is any county in which their Labor Code violations against these affected employees allegedly occurred. 

Authored by:
Robert Friedl, Senior Counsel

Rojas-Cifuentes v. Sup. Ct.: MSA Based on “Insufficient Facts and Theories” in PAGA Notice Letter Overturned on Writ of Mandate

In Rojas-Cifuentes v. The Superior Court of San Joaquin County, Cal. Ct. App. 3d Dist., No. C085643, Dec. 21, 2020 (“Rojas-Cifuentes”) (slip op. available here), the Court of Appeal issued a writ of mandate directing the Superior Court of San Joaquin County to set aside its order granting summary adjudication of an employee’s claim under the Private Attorneys General Act of 2004 (“PAGA”) in favor of the defendant, American Modular Systems, Inc. (“AMS”), and enter a new order denying the MSA. AMS’s motion was brought on the grounds that Plaintiff Rojas-Cifuentes’ PAGA notice letter to AMS and the Labor and Workforce Development Agency failed to include sufficient “facts and theories” (Cal. Lab. Code § 2699.3) to support his claimed Labor Code violations.

The “facts and theories” requirement for a PAGA notice letter, however, is not high and provides little fodder for employers seeking a procedural loophole to PAGA claims. The purpose of the PAGA notice requirement is to afford the Labor and Workforce Development Agency “the opportunity to decide whether to allocate scarce resources to an investigation.” Slip. op. at 6 (citing Williams v. Superior Court, 3 Cal.5th 531, 545-546 (2017)). Thus, to require a PAGA notice letter to “satisfy a particular threshold of weightiness . . . would undercut the clear legislative purposes the act was designed to serve.” Id. Following cases such as Williams and Brown v. Ralphs Grocery Co., 28 Cal.App.5th 824 (2018), Rojas-Cifuentes found “few ‘facts and theories’ are needed to satisfy PAGA’s notice requirement.” Id. at 7. Rojas-Cifuentes also confirmed that a PAGA notice letter need only allege broadly a class of “aggrieved employees” such as “current and former California non-exempt employees of AMS.” Id. at 10.

Considering the legislative purposes of PAGA, as cases such as Rojas-Cifuentes, Williams, and Brown all confirm, challenges to the sufficiency of PAGA notices have no legitimate purpose. They harm the interests of the State of California, in collecting civil penalties; of employees, as victims of Labor Code violations; and our overburdened judiciary, forcing the courts to address repeated, groundless challenges to the PAGA statute.

Authored by:
Robert Friedl, Senior Counsel