California employment law is notoriously volatile. The ever-changing landscape – especially as related to Labor Code violations and cases brought under California’s wide-ranging Private Attorneys General Act (“PAGA”), which authorizes representative actions for Labor Code violations – can make it challenging for employers to find certainty in how they plan for potential claims and address actual cases.
One way that employers had previously been finding closure in wide-ranging PAGA actions was by settling a plaintiff’s individual claims, and then seeking dismissal of any remaining PAGA claim(s) based on the plaintiff’s lack of standing to proceed. That creative solution is no longer viable in light of the California Supreme Court’s March 12, 2020 decision in the closely-watched case, Kim v. Reins International California, Inc.
As we blogged about previously here, back in 2018 the Court of Appeal in Kim v. Reins International California, Inc. ruled that once a PAGA plaintiff settles his individual claims, he loses standing to bring a representative PAGA action. Thus, following this Court of Appeal decision, employers could get rid of a PAGA lawsuit by trying to settle the underling non-PAGA claims with the plaintiff. If a settlement was reached, then once the plaintiff dismissed his claims the employer would file a motion to dismiss the PAGA claims and end the litigation.
All that changed recently when the California Supreme Court overturned the Court of Appeal’s decision and held that dismissing individual claims does not eliminate a plaintiff’s standing to proceed with his/her representative PAGA claims.
In its decision, the California Supreme Court carefully analyzed the language of the PAGA statute and emphasized that the statute defines standing in terms of violations – not injuries – and thus rejected the employer’s argument that standing somehow “disappears” once a plaintiff has been compensated for his own claims.
The Court then noted that, if it adopted the employer’s “injury-based” view of standing, many employees would be barred from prosecuting PAGA claims, which would run counter to the statute’s goal of ensuring effective Labor Code enforcement by creating the vehicle of representative PAGA actions.
What does the California Supreme Court’s decision in Kim v. Reins International California, Inc. mean for employers facing PAGA cases pending now (or who will in the future)? It means that employers can no longer “wipe away” those PAGA claims simply by settling the individual claims with the PAGA plaintiff. Instead, employers will have to settle the entire matter – both the plaintiff’s individual claims and his or her representative PAGA claims – in order to make the dispute go away. And that means the employer will need to get approval of the PAGA portion of the settlement, because all PAGA settlements need Court approval. This approval process means more legal fees and more delays before the case formally goes away.
You can read the entire California Supreme Court’s decision here.