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California Supreme Court Hands Plaintiffs’ Lawyers A Gift…

Today, the California Supreme Court issued its long-awaited opinion in Kim v. Reins Int’l Cal., Inc., holding that an employee’s settlement and dismissal of underlying Labor Code claims does not deprive the individual of the ability to later assert a representative action under the Labor Code Private Attorneys General Act (“PAGA”)—even if it involves the same underlying conduct.

First enacted in 2004, the oft-maligned Labor Code “bounty hunter” law permits so-called “aggrieved employees” to file non-class, representative actions to recover civil penalties for Labor Code violations that previously were only recoverable by the California Labor Commissioner.  As the Reins opinion notes, when it enacted PAGA, the Legislature intended to provide an alternative mechanism for enforcement of the State’s wage and hour laws in light of limited government resources.  Yet, despite the Legislature’s apparent good intentions, over the years, PAGA has engendered mounting criticism for spawning thousands of costly and frivolous lawsuits—often, for technical violations that involve little or no actual injury to any current or former employees.  Further, since 75% of any recovery goes to the State of California—not the allegedly “aggrieved employees”—the  primary beneficiaries of the law have been plaintiffs’ lawyers, whose attorneys’ fees can and often do dwarf the amounts received by their clients.

In Reins, the plaintiff filed a class action, seeking unpaid wages and statutory penalties (e.g., for missed meal and rest breaks, etc.); he also included a PAGA claim in his complaint.  The employer successfully moved to compel the non-PAGA claims to arbitration (PAGA claims are, says the Supreme Court, immune from arbitration), resulting in the court staying the PAGA claims pending resolution of the arbitration proceeding.  Thereafter, the parties settled the case, resulting in a dismissal of the employee’s individual claims.  The trial court later granted the employer’s motion for summary adjudication of the plaintiff’s remaining PAGA claim, reasoning that he lacked standing to continue to prosecute the PAGA claim in light of the earlier settlement and dismissal of his underlying Labor Code claims.  The Court of Appeal agreed; the California Supreme Court, however, did not.  Noting that PAGA’s definition of an “aggrieved employee” encompasses employees who already have been otherwise compensated for their purported injury, the Court focused on PAGA’s enforcement purpose.

The real winners here are the plaintiffs’ lawyers who will be further emboldened in bringing often frivolous PAGA suits—even in situations where the allegedly “aggrieved employees” already have been made whole.  The decision is likely to result in even more lawyers searching for “aggrieved” parties where none exist in order to extricate costly settlements from unsuspecting employers who thought an earlier settlement and release provided finality.

© 2020 Proskauer Rose LLP.

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About this Author

Anthony J Oncidi, Employment Attorney, Proskauer Rose Law Firm
Partner

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office. Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection....

310-284-5690
Kate Gold Labor and Employment Lawyer Proskauer
Partner

Kate Gold is a partner in the Labor & Employment Law Department in the Los Angeles office.

Kate has over 25 years of experience representing clients in a range of industries, across all areas of employment law.  An experienced litigator, she has represented clients in all types of employment-related suits, including class and collective actions, discrimination, retaliation and harassment, non-compete and wage/hour matters.  In addition to litigating, she conducts high-level workplace investigations and routinely counsels clients on matters involving the full range of state and federal employment issues.

Kate also represents clients in disputes involving  misappropriation of intellectual property and trade secrets, interference with contract, and unfair competition. Kate also counsels on classification of employees, employment issues in the context of purchase and sale of businesses, and non-competition agreements. Additionally, she negotiates and drafts executive employment and separation agreements and conducts training on sexual harassment prevention.

Kate received her B.A. and J.D. from the University of California, Berkeley.

+1.310.284.5623
Associate

Philippe (Phil) A. Lebel represents employers in all aspects of employment litigation, including wage and hour, wrongful termination, discrimination, harassment, retaliation, whistleblower, trade secrets, and breach of contract litigation, in both the single-plaintiff and class-action context, at both the trial and appellate level, and before administrative agencies. Phil also represents employers in connection with labor law matters, such as labor arbitrations and proceedings before the National Labor Relations Board. Additionally, Phil counsels clients to ensure compliance with federal...

+1.310.284.4558