Employees Who Settle, Dismiss Individual Claims Can Still Bring PAGA Lawsuits

Employees who settle individual claims with their employers can still pursue PAGA claims. PAGA lawsuits
Employees who settle individual claims with their employers can still pursue PAGA claims.

Yesterday, the California Supreme Court ruled that employees that settle and dismiss individual Labor Code violation claims against employers can still pursue a claim under the Private Attorneys General Act (PAGA), a statute that deputizes them to enforce violations on behalf of the state.

Before the PAGA, only the state’s Labor Commissioner, not employees, could recover certain Labor Code civil penalties. To facilitate broader enforcement of the Labor Code, the California Legislature enacted the PAGA, which allows an “aggrieved employee” to bring a lawsuit on behalf of the state to enforce the Labor Code and collect civil penalties. The plaintiff/employee “stands in the shoes” of the state and may seek penalties not only for their individual violations, but also for any violations committed against other aggrieved employees. Most of the penalties go to the state, but some also go to the employees. An aggrieved employee is someone who was employed by the alleged violator and “against whom one or more of the alleged violations was committed.”

In this recent court case, a training manager sued his employer claiming he and other managers had been misclassified as exempt and accusing his employer of failing to pay accurate wages and overtime as well as other related claims. He also sought civil penalties under the PAGA. The PAGA claim was put on hold while the manager and his employer went to arbitration over his individual claims, ultimately settling and dismissing them. The only remaining claim in the lawsuit was the PAGA claim.

The employer argued that once the manager settled his claims, he was no longer “injured” and could not pursue the PAGA claim. In most cases, if the plaintiff doesn’t have an injury, then the plaintiff can’t bring a claim because there’s nothing for the court to redress.

That made sense to the trial and appellate courts, both of which agreed that the manager could not pursue the PAGA claim because his rights had been redressed and he was no longer an “aggrieved employee” under the law. The California Supreme Court was not persuaded.

Looking at the language of the law, its purpose and the overall statutory scheme, the court reiterated that PAGA claims are legally distinct from other civil lawsuits. They are a dispute between the state and the employer, not the employees and employer. Moreover, the ability to bring a PAGA claim is defined in terms of violations, not injury. The civil penalties recovered under the PAGA are separate from the other statutory damages and penalties that may be available to employees for individual harms. The PAGA does not even require the employee to claim that any economic injury resulted from the alleged violation.

The manager became an aggrieved employee when one or more violations were committed against him, and his settlement did not nullify the alleged violations. So, even after settling and dismissing individual claims, employees can still pursue civil penalties under a PAGA claim.

James W. Ward, Employment Law Subject Matter Expert/Legal Writer and Editor

CalChamber members can read more about “Private Attorneys General Act (PAGA) Claims” in Wage and Hour Enforcement and Penalties in the HR Library. Not a member? See how CalChamber can help you.

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