In a unanimous decision issued today in the closely-watched case of Lawson v. ZB, N.A., the California Supreme Court held that employees who file claims against their employers for penalties under the Private Attorneys General Act ("PAGA") to enforce the Labor Code may not seek to recover unpaid wages under Labor Code section 558 on behalf of employees. In the lower courts, the parties fought about whether a PAGA plaintiff subject to an arbitration agreement seeking both penalties and unpaid wages through Labor Code section 558 would be required to arbitrate the unpaid wages portion of their claim. The Cal Supremes cut off this argument at the knees, holding that a PAGA plaintiff may not even seek unpaid wages under Section 558 because the statute authorizes only the State, not a private plaintiff, to bring such a claim. Because the Court previously held that a PAGA plaintiff seeking penalties may not be compelled to arbitration, the Lawson plaintiff -- now stripped of her claim for unpaid wages -- could not be compelled to arbitration.
Sadly, this case is a big victory for employers. It limits the scope of the remedies a private plaintiff may seek under PAGA, the only remaining claim that can be brought in court (as opposed to arbitration) for Labor Code violations. The Supreme Court issued a bright-line ruling that private plaintiffs may seek only penalties (which have a one-year statute of limitations and which must be shared with the State) and can't seek unpaid wages (which arguably have a three-year statute of limitations and which go 100% to the employees). The case is a victory for employees only to the extent that the Court reaffirmed its previous ruling that PAGA claims for penalties may not be compelled to arbitration.
The practical effect of this ruling will be to send much more PAGA settlement money to the State. Previously, in a PAGA-only settlement, the plaintiff could designate a significant portion of the settlement money as unpaid wages and distribute that portion 100% to the employees. The plaintiff could designate the remaining portion as pure PAGA penalties, 75% of which must be shared with the State. Now, PAGA plaintiffs will no longer have the option to designate any portion of a PAGA-only settlement as unpaid wages, which means that 75% of the settlement must go to the State. This means less money in the hands of employees who actually suffered the violations. Hopefully, the State will use the money to hire more attorneys to enforce the Labor Code.
For you legal eagles out there, the critical passage of Lawson states: [T]he amount for unpaid wages referenced in section 558 is not part of that section’s civil penalty and is not recoverable through a PAGA action. Instead . . . this part of a section 558 citation represents compensatory damages. Section 558, in other words, authorizes only the Labor Commissioner to issue a citation that includes both a civil penalty and the same unpaid wages Lawson can alternatively recover under section 1194 through a civil action or an administrative hearing. But section 2699, subdivision (a) does not authorize employees to collect section 558’s unpaid wages through a PAGA action."
If you believe that you have not been paid all of the wages owed to you by your employer, contact us today for a free consultation.
Teukolsky Law founder Lauren Teukolsky was quoted in a Courthouse News story on the Private Attorneys General Act ("PAGA"), a California law that allows private attorneys to stand in the shoes of the State to bring labor enforcement actions against employers who break the law. PAGA is under attack by a consortium of businesses that are suing to have PAGA declared unconstitutional. Teukolsky Law represents a group of 57 nurses who have sued a Tenet-owned hospital in Templeton, CA for labor violations, including failing to provide rest breaks because the hospital was understaffed and the nurses did not want to leave their patients unattended.
Nine of the nurses have brought a PAGA action in San Luis Obispo Superior Court to represent all nurses at the hospital because they all signed arbitration agreements requiring them to bring their claims in secret, private arbitration proceedings. Courts currently allow employees to bring PAGA claims in open court, even if they have signed arbitration agreements. The arbitration agreements the nurses signed contain class action waivers, which means that the nurses are not allowed to bring an action to represent all of the nurses with similar claims at the hospital -- except through PAGA.
If business groups are successful in having PAGA declared unconstitutional, this could greatly impair the ability of employees to vindicate their workplace rights. Teukolsky Law will continue to fight every day for the rights of employees against powerful business lobbies that seek to take away their rights. If you believe that your rights have been violated, contact us today for a free consultation.
On July 13, 2017, the California Supreme Court issued a blockbuster decision in Williams v. Superior Court, holding that plaintiffs who bring representative wage-and-hour actions under California's Private Attorney General Act ("PAGA") have broad discovery rights and are entitled to obtain a the names and contact information of other "aggrieved employees" without making a heightened showing that the employer has violated the law. This is the most significant PAGA decision since the Supreme Court held in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), that an employee’s right to bring a representative PAGA action may not be waived through a forced arbitration agreement.
While employers will undoubtedly bemoan the Williams decision, let's just remember that we are on the precipice of a Supreme Court decision in the 2017-2018 term that will likely eviscerate wage-and-hour class actions on a nationwide basis. If the Supreme Court rules as I suspect they will, PAGA will be the only remaining vehicle for employees to bring representative wage-and-hour actions. This shifting class action landscape was undoubtedly on the minds of the Cal Supremes when they issued the pro-employee Williams decision yesterday.
While employment class actions are likely on their way out the door, employees in California can still pursue representative claims on behalf of themselves and other affected employees under the Private Attorney General Act, aka "PAGA." Under PAGA, an "aggrieved employee" can seek penalties and unpaid wages against an employer for violations like the failure to pay overtime and minimum wage, and the failure to provide meal and rest breaks. In Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), the California Supreme Court held that an employee cannot be compelled to waive her right to bring a representative PAGA claim in a predispute arbitration agreement. In a trio of cases decided in the past year, the California Court of Appeals held that employers cannot use predispute arbitration agreements to compel a PAGA case to arbitration. See Betancourt v. Prudential Overall Supply, 9 Cal.App.5th 439 (2017); Hernandez v. Ross Stores, Inc., 7 Cal.App.5th 171 (2016); and Tanguilig v. Bloomingdale’s, Inc., 5 Cal.App.5th 665 (2016). This means that employees who have signed arbitration agreements can still bring their representative PAGA actions in court. In response to Iskanian and its progeny, the employer lobby, including the Chamber of Commerce, is hard at work trying to pass legislation to limit PAGA's reach. Their efforts so far have been largely unsuccessful, but who knows what next year's legislative session will bring.
Lauren Teukolsky is the founder and owner of Teukolsky Law, A Professional Corporation.