In March 2020, the California Supreme Court issued a highly anticipated opinion in Kim v. Reins International California, Inc., holding that California employees do not lose standing under the Private Attorneys General Act (“PAGA”) after settling related individual claims stemming from Labor Code violations.  This Court’s decision reinforces PAGA’S purpose of curtailing widespread employer abuse through private representative enforcement action.  Kimalso curbs California employers’ ability to clip burgeoning PAGA actions by way of louche individual side deals.  By expanding employee capacity to maintain PAGA representative actions, the California Supreme Court fortifies the shield protecting California employees.

After Settling Individual Claims in Arbitration, Plaintiff Kim Sought to Litigate the Remaining PAGA Claim as an Aggrieved Employee

In Reins, the plaintiff filed a class action and PAGA representative action seeking unpaid wages and statutory penalties for worker misclassification.  The Complaint asserted five causes of action: 1. Failure to pay wages and overtime; 2. Failure to provide rest and meal breaks; 3. Failure to provide accurate wage statements; 4. Waiting time penalties; and, 5. Breach of California Unfair Competition law.

The defendant employer successfully moved to compel the non-PAGA claims to arbitration.  The court stayed the PAGA claims pending resolution of the arbitration.  Thereafter, the parties settled the employee’s individual claims.

Following settlement, the employee continued pursuing the lone PAGA claim in court.  The defendant employer moved for summary adjudication, seeking a court determination that the PAGA claim was settled and did not need be tried.  In granting the motion, the trial court concluded that the plaintiff was no longer an aggrieved employee and lacked PAGA standing.

The California Supreme Court Holds That Employees Maintain PAGA Standing After Settling Individual Claims for Labor Code Violations

After the plaintiff’s unsuccessful appeal, the California Supreme Court reversed course.  It held a plaintiff’s settlement of individual Labor Code claims did not deprive an aggrieved employee of their PAGA standing.  “Settlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies.”  Kim, p. 1.  In support of the holding, the California Supreme Court examined PAGA’s statutory language, history, scheme, and other Labor Code provisions, which demonstrate that an employee maintains standing under PAGA despite an individual settlement.

Aggrieved Employee Individual Claims are not Inextricably Linked to PAGA’s Standing Provisions

PAGA standing has two elements: 1. The plaintiff must be an aggrieved employee – that is someone employed by the violator; and, 2. Against whom one or more of the alleged violations was committed.  The KimCourt concluded that PAGA standing did not require an injury.  Thus, the plaintiff satisfied his standing requirements once he suffered a Labor Code violation, and he did not lose standing after settling his individual claims.

Because the California Legislature defined standing in terms of violation – not injury – a PAGA plaintiff is not required to claim economic injury.  The KimCourt’s analysis comports with the distinction between damages and civil penalties.  Damages are intended to make a plaintiff whole.  In contract, civil penalties, which are akin to punitive damages, do not require injury and are intended to punish the violator, and deter future misconduct.  This means that an aggrieved employee need not have damages to litigate a PAGA enforcement action and may do so once they suffer a Labor Code violation.

PAGA Enforcement Actions Effectuate Critical Workplace Protections for California Employees

PAGA exists to supplement California’s limited Labor Code enforcement capability by empowering employees to enforce workplace protections as representatives of the state.  Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014).  This purpose renders PAGA claims enforcement actions between the employer and the state where the entire claim is a representative action lacking an individual component.  The Kim Court held that another conclusion inevitably undermines PAGA’s purpose.

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PAGA Gives Teeth to Impotent Labor Code Provisions

The California Supreme Court also indicated that PAGA acts as a mechanism for relief for numerous Labor Code provisions lacking a private right of action or remedy component.  Standing alone, these impotent Labor Code provisions, including the provisions prohibiting employee misclassification, primarily protect California employees through PAGA representative actions.  Further, they often lack provisions imparting remedies for injured employees.  “Requiring the existence of an unredressed injury to support standing would be problematic for PAGA suits to enforce the many Labor Code statutes that do not create a private right to sue.”  Kim at p. 15.  Requiring aggrieved employees to exhibit injury for PAGA standing could render Labor Code bereft of a private right of action irreconcilable with the PAGA and thwart Labor Code enforcement.

PAGA Protects Hardworking California Employees from Abusive Employers

Enacted in 2004, California’s PAGA shields employees from common employee exploitation, such as rest & meal break denials and off-the-clock work.  Over the years, PAGA has protected millions of California employees through broad private enforcement.  PAGA is the advancement of ideals manifested in the California Constitution, which expressly empowers the state to, “…provide for minimum wages and for the general welfare of employees…”  California Constitution, Article XIV § 1.  PAGA is a critical tool for addressing traditionally systemic underenforcement of California’s workplace protections, particularly within low-wage industries.

Although the employer lobby often points to alleged costly and frivolous lawsuits, California’s overriding public interest in protecting fundamental human dignity – by promoting enforcement mechanisms for minimum working standards – outweighs the alleged minimum burden created from PAGA litigation.  Further, the lobby’s claims are belied by the fact that employees are limited to recovering only a small portion of their penalties.

PAGA is an effective mechanism for enforcing California employee protections.  The California Supreme Court has taken a laudable step towards furthering the rights and protections of California employees against abusive employers.  With this opinion, the California Supreme Court permits California employees to obtain compensation for their individual claims and continue to curtail workplace abuse through private PAGA enforcement actions, which benefits all California employees.

Click here to read the unabridged Kim v. Reins International, Inc. opinion.