California Supreme Court Finds Employees Do Not Lose Standing to Pursue PAGA Claims If They Settle Individual Claims for Labor Code Violations

March 13, 2020
Overview 
Employees do not lose standing to pursue a claim under the Private Attorneys General Act of 2004, Cal. Lab. Code §§ 2698, et seq., if they settle and dismiss their individual Labor Code violation claims, the California Supreme Court held in Kim v. Reins Int’l Cal., Inc., No. S246911, — P.3d — (Cal. Mar. 12, 2020).
 
The Private Attorneys General Act 
The Private Attorneys General Act (“PAGA”) was enacted to facilitate broader enforcement of the California Labor Code.  PAGA allows “aggrieved employees” to pursue civil penalties against their employers on the state’s behalf, provided the employees comply with the notice procedures set forth in the statute.  Cal. Lab. Code §§ 2699, 2699.3.  An “aggrieved employee” is defined as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”  Id. § 2699(c).
 
PAGA essentially deputizes aggrieved employees to act as a private attorney general to enforce California’s workplace laws.  The civil penalties a PAGA plaintiff may recover on the state’s behalf are distinct from the statutory damages that may be available to employees suing for individual violations of the Labor Code.  Of the civil penalties recovered, 75% goes to the Labor and Workforce Development Agency and 25% goes to the aggrieved employees.  Id. § 2699(i).
 
Case Background 
Defendant Reins International California, Inc. operates restaurants in California and employed Plaintiff Justin Kim as a training manager.  Kim sued Reins in a putative class action, asserting claims for failure to pay wages and overtime, failure to provide meal and rest breaks, failure to provide accurate wage statements, waiting time penalties, and unfair competition.  The complaint also sought civil penalties under PAGA.  Kim later accepted a settlement offer and dismissed all of his individual claims, leaving only the PAGA claim for resolution.  Reins successfully moved for summary adjudication on the ground that Kim lacked standing.  The trial court reasoned that Kim’s rights had been completely redressed by the settlement and dismissal of his individual claims and that he was no longer an “aggrieved employee.”  After the decision was affirmed on appeal, the California Supreme Court granted review.
 
The California Supreme Court Decision 
On March 12, 2020, the California Supreme Court held 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 Court rejected Reins’ argument that Kim was no longer an “aggrieved employee” because he accepted compensation for his injury.  The Court stated that standing under PAGA is based on the employer’s violation, not the injury suffered by the employee.  The Court found that “Kim became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him.”  “Settlement did not nullify these violations.”

Class and Collective Actions Wages and Overtime