Guest post by Charlie Nelson Keever:

Brace yourself.  Plaintiffs can now use representative PAGA actions as the basis for a statewide “fishing expedition” to discover alleged employer misconduct.

"Hello, I am suing you" nametag
Copyright: iqoncept / 123RF Stock Photo

Now, I’m a baby lawyer (or, more aptly, an almost baby lawyer) – I’m a Summer Associate trying to figure out what this means so I can tell you all about it. And while my brilliant and talented supervising attorney (Hey, Nancy Yaffe!) assures me that I’ve understood this correctly, this does not smell right to me.

First of all, there’s this thing called PAGA (The Private Attorneys General Act), that allows one employee to initiate a civil action against an employer on behalf of other allegedly aggrieved employees for Labor Code violations. Employees like representative PAGA actions because they don’t need to meet the rigorous requirements of traditional class actions. So basically, one employee having a problem at work – say, they’re not getting appropriate meal breaks – can use this super convenient tool to sue their employer. Not only that, they get to act the hero and say they’re suing on behalf of other “aggrieved” employees, even if they don’t know if anyone else is having the same problem. These lawsuits bring up a lot of questions like “Who is an ‘aggrieved employee’?” and “How much discovery should be allowed?” Conflicts over these issues make PAGA lawsuits particularly burdensome and expensive for defendant-employers to manage.

Last week, the CA Supreme Court answered one of those questions. In Williams v. Superior Court, Plaintiff-employee Michael Williams filed a representative PAGA action against Defendant-retailer Marshalls alleging that the company failed to provide him and other employees with proper meal and rest breaks, and that it failed to provide timely wage payments and accurate wage statements. To bolster his claims, Williams served interrogatories requesting contact information from 16,500 current and former non-exempt Marshalls’ employees throughout California – not just at the location where he worked. Marshalls objected on the grounds of relevance, scope, burden, and employee privacy. They essentially argued that Williams had no reason to believe that his issues at work were company-wide. So the trial court limited production of contact information to employees at the store where Williams worked.  The Court of Appeal agreed.

But the California Supreme Court disagreed, and found that nothing more than a mere allegation of a state-wide policy issue is necessary to compel preliminary discovery. So essentially, if one disgruntled employee says they have a problem, they’re entitled to contact information for employees all over the state to figure out if anyone else is having the same problem. While the Court held that this wasn’t an invasion of employee privacy, I’m willing to bet that a lot of employees would disagree. The Court also opposed the lower courts’ conclusions that discovery seeking statewide contact information was unduly burdensome to the defendant employer.

So What Can Employers Do?

While this might sound like all bad news for employers, the Court did shed some light on how employers might protect themselves and their employees by limiting the scope of discovery if they are unlucky enough to get sued in a PAGA action.

  • First, the Court noted that there might be “special reason[s] to limit or postpone” a PAGA plaintiff’s access to contact information (though the Court didn’t specify what those reasons might be). It will be up to employers to set forth specific facts that demonstrate undue burden and/or particular privacy concerns.
  • Second, the Court suggested that an employer might seek a protective order that would condition discovery on, for example, a confidentiality requirement or prohibition against using the information for purposes outside the confines of a specific lawsuit.
  • Finally, the Court indicated that an employer attempting to subvert such broad discovery might file a motion to “establish the sequence and timing of discovery,” although the mere availability of this measure may do more harm than good, as it tends to undermine the argument that the discovery is unduly burdensome.

Here’s my takeaway: even with these potential interventions, the best protection for employers is compliance with the Labor Code, and fixing any issues as soon as the PAGA notice is served. Now would be a good time for employers to review previous posts related to the PAGA from our blog.


Charlie Nelson Keever is a summer associate, based in the firm’s Los Angeles office.

Copyright: Poofy / 123RF Stock Photo
Copyright: Poofy / 123RF Stock Photo

The California Supreme Court has once again deviated from what many view as clear precedent of the U.S. Supreme Court concerning the enforcement of arbitration agreements. Last week, the California court decided McGill v. Citibank, N.A., holding that state “public policy” precludes the enforcement of arbitration agreements where a class sues for “public injunctive relief” under Business and Professions Code § 17200, California’s much abused “unfair competition” statute. This decision comes on the heels of Iskanian v. CLS, in which the California court held that a class waiver in an arbitration agreement was unenforceable to prevent a representative action under the Private Attorneys General Act, again citing “public policy.” The McGill and Iskanian decisions are at odds with recent SCOTUS opinions such as ATT Mobility v. Concepcion, and American Express Co. v. Italian Colors. In the Italian Colors case, the high court specifically rejected state “public policy” as any kind of exception to the sweeping preemption of the Federal Arbitration Act (“FAA”).

California has been in a running dog fight with the FAA since 1987. In that year, SCOTUS decided Perry v. Thomas, in which Justice Thurgood Marshal upheld the FAA under the Commerce and Supremacy clauses, and slapped down California’s attempt to undermine arbitration agreements. Thirty years later, California courts remain determined to block arbitration under PAGA and Section 17200 in the face of otherwise enforceable arbitration agreements.

Also, with today’s swearing in of Neil Gorsuch, SCOTUS returned to its full complement of nine justices. Look for the high court to grant review of California and Ninth Circuit cases that follow McGill and Iskanian in the next couple of years with an eye toward overturning those decisions. In the meantime, companies should continue to include waivers of class and representative actions in their arbitration agreements with consumers and employees, noting that the waivers are enforceable to the extent permitted by applicable law.

We’ve made no secret of the fact that we’re not big fans of the Private Attorneys General Act (PAGA). Our gripes include the following:

  • PAGA drastically expands the ways that employers can be sued, because employees can sue for violation of statutes that previously provided no private right of action.
  • PAGA expands potential liability for employers, since employees can sue on behalf of themselves and other aggrieved employees.
  • PAGA claims are exempt from arbitration agreements.
  • The procedures that apply to PAGA actions are ill-defined. While a class action plaintiff has to satisfy specific requirements to represent a class, it’s unclear what, if anything, a PAGA plaintiff must show to bring a representative action.

PAGA is based on the pretense that employees are bringing these claims on behalf of the state of California, which lacks the resources to pursue every non-compliant employer. Keep in mind that non-compliant employers, in this context, includes those that don’t put the inclusive dates of the pay period on the wage statement or who put the employer’s address on the paycheck, but not on the attached pay stubs. Pretty heinous stuff, right?

In keeping with this pretense that plaintiffs are acting for the state, 75% of the penalties go to the Labor and Workforce Development Agency (LWDA) and 25% goes to the “aggrieved employees.” That means that, for every dollar an employer pays in PAGA penalties, an employee shares 25¢ with all other aggrieved employees. When it comes time to settle cases, the parties decide what part of the settlement to designate as PAGA penalties and what part goes directly to the employees. Invariably, plaintiffs want more to go to them directly because they and their attorneys get all of that. Employers will go along with that because they get more bang for their buck.

Copyright: lisafx / 123RF Stock Photo
Copyright: lisafx / 123RF Stock Photo

Now, as part of the state’s new budget:

  • The LWDA will take 60 days to review proposed PAGA claims to decide if it wants to bring an action itself (previously 30 days).
  • The plaintiff cannot file the action until 65 days after submitting information to the LWDA (previously 33 days).
  • Any proposed settlement needs to be sent to the LWDA and approved by the Court (previously, you only needed court approval).

The fact that the LWDA will be more active in reviewing proposed PAGA settlements means that more money will need to be earmarked for PAGA penalties. More money going to PAGA penalties, means less going to plaintiffs directly. Since employees see just a fraction of those penalties, it will be more expensive for employers to settle lawsuits that include PAGA claims. You can add that to our ever growing list of reasons why, for employers and their counsel, “PAGA” is a four-letter word.