As we have noted throughout the years, interpreting the California Private Attorneys General Act (PAGA) can be a difficult task. See our blog articles of July 14, 2017, Aug. 4, 2017, Nov. 29, 2017 and Sept. 12, 2019. California adopted PAGA to support the state Labor and Workforce Development Agency’s enforcement burden by empowering workers to bring claims on the state’s behalf.

Now in a case of first impression the California Supreme Court has determined what “aggrieved” means under PAGA and the impact of an employee’s settlement of his individual claims. The court determined that “[s]ettlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies.”

The Underlying Facts

In Kim v. Reins International California, Inc., March 12, 2020, Case No. 5246911, Reins International California, Inc. (Reins) employed Justin Kim as a training manager in its California restaurants. When he was hired, Kim signed an individual arbitration agreement. After he brought a putative class action claiming misclassification against Reins, the company moved to dismiss the class claims and for individual arbitration while acknowledging that the PAGA claim could not be waived or arbitrated. See Iskanian v. CLS Transportation, Los Angeles, LLC (2014) 59 Cal. 4th 348, 382-384.

The trial court dismissed the class claims but ordered arbitration of all other claims except those under PAGA and for injunctive relief. The PAGA claim was stayed pending the completion of arbitration. Ultimately, Kim settled his individual claims and dismissed them. Then Reins sought summary adjudication of the remaining PAGA claims because Kim lacked standing. The court concluded that his rights were “completely redressed” by settlement and ordered dismissal of his individual claims. (Slip Op. at 5). Consequently, it held Kim was no longer an “aggrieved employee” possessing PAGA standing. The court of appeals affirmed that determination.

Legal Analysis

In reversing the lower court’s decision, the California Supreme Court made several important (and somewhat surprising) conclusions. PAGA standing is not linked to the viability of individual claims. “An employee has PAGA standing if ‘one or more of the alleged violations was committed’ against him,” citing § 2699(c). (Emphasis in original). According to the Court, “[t]his language indicates that PAGA standing is not inextricably linked to plaintiff’s own injury. Employees who are subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every violation.”

The Court also concluded that basing PAGA standing “on the existence of an unredressed injury” would be adverse to many Labor Code statutes that provide for civil penalties without conferring a private right of action. Indeed, the Supreme Court also reasoned that nothing in PAGA’s legislative history “suggests the Legislature intended to make PAGA standing dependent on the existence of an unredressed injury, or the maintenance of a separate, unresolved claim”. (Slip Op. at 17).

A portion of the Supreme Court’s decision was premised on the procedural history of the case. The settlement with Kim excluded the pending PAGA claim. And, Reins’ strategy on standing appeared to disturb the Court:

Reins conceded Kim’s PAGA claim had to be stayed in superior court while the other claims were arbitrated. It then settled the arbitrable claims with an offer that encompassed only Kim’s “individual claims.” . . . . When Kim returned to court to litigate the PAGA claim, which the parties had specifically carved out of the settlement, Reins argued Kim had lost standing. [T]his turnabout was hardly fair play. See Slip Op. at 18-19 n. 7. (Emphasis in original).

The Kim opinion seems to undermine earlier decisions of the California Court of Appeals and the Ninth Circuit that offered an analytical roadmap for arbitrators and courts to resolve both individual and PAGA claims. Our prior articles discussed this sequencing. Only time will tell what the true impact of the opinion will be.

At this point taking steps to ensure compliance with California and federal employment laws is the only sure path to protecting employers.

Bottom Line:

The Kim opinion held that the settlement of individual claims does not deprive an employee of PAGA “standing.”