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Episode 32 of the Class Re-Action Podcast is now out. We discuss Magadia v. Wal-Mart Associates, Inc. (9th Cir. May 28, 2021). And I try to get Linh to let me explain California’s wage & hour laws to employers, but she doesn’t let me.
It’s the big 30! Episode 30 of the Class Re-Action podcast is now out. We’re going to have to claim to be on Episode 29 for the next 10 Episodes, however. This one is a little longer than we planned, but it’s good stuff.
Hear the wonders of our pontification of what happened with arbitration agreements in two recent decisions right here, in Episode 29 of the Class Re-Action podcast. After you listen, be sure to leave a comment about how unbelievably exciting the episode was, as well as your favorite flavor of Icee.
So, it turns out that the answer to my question is GOAT, not goat (he says with tongue planted firmly in cheek). ZB, N.A., et al. v. Superior Court (Lawson) (September 12, 2019) was issued this morning, and, unsurprisingly I think, the Supreme Court dropped an off speed pitch over the plate and froze everybody. You could see the windup with the italics added by the Court to this passage:
Before the enactment of the PAGA, section 558 gave the Labor Commissioner authority to issue overtime violation citations for “a civil penalty as follows: [¶] (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.” (Id., subd. (a), italics added.)
Slip op, at 1-2. See that? It’s the tell for what’s coming:
What we conclude is that the civil penalties a plaintiff may seek under section 558 through the PAGA do not include the “amount sufficient to recover underpaid wages.” Although section 558 authorizes the Labor Commissioner to recover such an amount, this amount –– understood in context –– is not a civil penalty that a private citizen has authority to collect through the PAGA. ZB’s motion concerned solely that impermissible request for relief. Because the amount for unpaid wages is not recoverable under the PAGA, and section 558 does not otherwise permit a private right of action, the trial court should have denied the motion. We affirm the Court of Appeal’s decision on that ground. On remand, the trial court may consider striking the unpaid wages allegations from Lawson’s complaint, permitting her to amend the complaint, and other measures.
Slip op., at 2-3. So that’s it then.
There is, of course, a bit more, given that the Opinion is 30 pages long, but after the procedural history, the balance of the discussion is a detailed example of statutory construction. For instance, the Court finds that the wages referred to in Section 558 must be treated as a compensatory wage, else the provision would be internally inconsistent with Section 1197.1. Read it, if for no other reason than to see the thoroughness with which a sentence can be parsed, and persuasively I might add.
The Court was unanimous in its decision.
It isn’t entirely clear who you would call the “winner” here, given the disconnect between affirming the Court of Appeal and the practical result, but James L. Morris, Brian C. Sinclair and Gerard M. Mooney, of Rutan & Tucker, represented the Petitioners, who no longer have to deal with the potential for an award of unpaid wages as part of Section 558 penalties under PAGA.
Right now, Lawson v. ZB, N.A., review granted Mar. 21, 2018, S246711, is making its way through the California Supreme Court. The case asks whether a representative action under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (‘PAGA”) seeking recovery of individualized lost wages as civil penalties under Labor Code § 558 fall within the preemptive scope of the Federal Arbitration Act (9 U.S.C. § 1 et seq.). Lawson was argued on June 5, 2019. Supplemental briefing was requested and received, and the matter was deemed submitted on June 27, 2019. That means a decision is imminent.
Today, in Mejia v. Merchants Building Maintenance, LLC (August 13, 2019), the Court of Appeal (Fourth Appellate District, Division One) another Court of Appeal came down on the side of the Courts of Appeal that have concluded that PAGA claims cannot be split so as to direct a portion to arbitration:
We agree with the conclusion of the Lawson and Zakaryan courts on this question, and conclude that a single PAGA claim seeking to recover section 558 civil penalties may not be "split" between that portion of the claim seeking an "amount sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or $100 per-violation, per-pay-period assessment imposed for each wage violation. The result is that an employee bringing a PAGA claim to recover the civil penalties identified in section 558 may not be compelled to arbitrate that portion of her PAGA claim that seeks an amount sufficient to recover underpaid wages pursuant to that statute, while the rest of the claim that seeks the $50 or $100 per-pay-period per violation portion of the penalty remains in a judicial forum. We therefore affirm the trial court's order denying the MDM defendants' motion to compel arbitration in this case
Slip op., at 6.
As for reading tea leaves, the Lawson matter (perhaps to be known as the ZB matter due to a change in the name of the case), as noted above, requested supplemental briefing on this question:
If this court concludes Labor Code section 558's "amount sufficient to recover underpaid wages" is not a "civil penalty" recoverable under the Private Attorneys General Act (Lab. Code, § 2698 et seq.), should the trial court be ordered to deny ZB's motion to compel arbitration?
Lawson docket. That question suggests that at least someone on the Supreme Court is thinking about whether an aggrieved employee can recover unpaid wages at all through Labor Code § 558. There’s a curve for you.
In Moorer v. Noble L.A. Events Inc. (February 27, 2019), the Court of Appeal (Second Appellate District, Division Seven) definitively answered the question of whether the twenty-five percent share of a PAGA action that goes to “aggrieved employees” can be retained by the plaintiff bringing the action as a type of relator share. No, you can’t do that:
Moorer contends that because a PAGA action is a type of qui tam action, under which the private citizen enforces a statute on behalf of the government, the 25 percent of the civil penalties not allocated to the government should be distributed to the aggrieved employee who brings the PAGA action. Although Moorer asserts policy arguments for why this approach would serve the goals of PAGA, the Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC, supra, 59Cal.4th 348 (Iskanian) held otherwise. As the Supreme Court explained, a PAGA representative action “conforms to the traditional criteria” for bringing a qui tam action, “except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation.” (Iskanian, at p.382;see Williams v. Superior Court (2017) 3Cal.5th 531, 545 (Williams) [PAGA “deputiz[es]employees harmed by labor violations to sue on behalf of the state and collect penalties, to be shared with the state and other affected employees”].)
Slip op., at 7-8.
On Wednesday, February 20, 2019, the United States Supreme Court held, in Timbs v. Indiana, that the Eighth Amendment’s ban on excessive fines applies to the states. You can find plenty of analysis about this decision out there as it applies to things like state asset forfeiture laws, so I won’t even try to duplicate all of that analysis here, But it occurs to me that we should expect to see this holding tossed into the mix in PAGA cases on the theory that a large PAGA penalty violates the Eighth Amendment. How well that works remains to be seen, since, just spitballing here, a large PAGA penalty is pretty much only going to arise when an employer has lots of employees and violates lots of wage and hour provisions lots of times. Of course, out at the fringe, this argument might have some traction. I’m sure we’ll see in the next few years.
I previously mentioned the surprising appellate court opinion in Huff v. Securitas Security Services USA (May 23, 2018). When it was issued, I was certain that review would be requested, and I would not have been surprised if review had been granted. However, I missed the fairly quick denial of review and depublication. That denial issued on August 8, 2018. Sorry I missed that; this is a noteworthy opinion.
I won't hit you with too much analysis of a case right before the 4th of July holiday, but in Juarez v. Wash Depot Holdings, Inc. (July 3, 2018), the Court of Appeal (Second Appellate District, Division Six), upheld a trial court order declining to enforce an arbitration agreement. The peculiarity that led to the result is pretty simple:
A company provides its employees with a handbook setting forth its employment policies. The handbook is written in English and Spanish. The handbook requires arbitration of employment disputes and denies an employee's right to bring an action under the California Private Attorneys General Act (PAGA). The English version states that the denial of the right to bring a PAGA action is severable if such denial is found by a court to be unenforceable. The Spanish version provides that the PAGA denial is not severable.
Slip op., at 1. The Court concluded that this was potentially deceitful and declined to sever the provision regarding PAGA, agreeing that the entire agreement was unenforceable.
Jack Bazerkanian of Shin Ryu Bazerkanian, LLP, and James M. Lee, Caleb H. Liang of LTL Attorneys LLP, represented the successful Plaintiff and Respondent.
I haven't posted anything yet about Epiq Systems Corp. v. Lewis (what's there to say that hasn't been kicking around for years in various ways), but certainly that decision motivates a renewed focus on PAGA claims in California. And would you look at that?! Here's a new decision about PAGA. In Huff v. Securitas Security Services USA, Inc., the Court of Appeal (Sixth Appellate District) examined the following question:
This case presents the question of whether a plaintiff who brings a representative action under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698, et seq.) may seek penalties not only for the Labor Code violation that affected him or her, but also for different violations that affected other employees.
Slip op., at 1. So at this point, I must admit that my assumption for about 5 seconds was that the answer would be a big "No, they may not." To my surprise, the Court held to the contrary:
As we will explain, we conclude that PAGA allows an “aggrieved employee” –– a person affected by at least one Labor Code violation committed by an employer –– to pursue penalties for all the Labor Code violations committed by that employer.
Slip op., at 1. That was unexpected.
The Court's primary analysis is well summarized by this passage:
When we interpret a statute our primary task is to ascertain the Legislature’s intent and effectuate the purpose of the law. We look first to the words of the statute itself as the most direct indicator of what the Legislature intended. (Hsu v. Abbara (1995) 9 Cal.4th 863, 871.) PAGA provides in section 2699, subdivision (a) that “any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.” The statute then specifically defines “aggrieved employee” in section 2699, subdivision (c): “ ‘aggrieved employee’ means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”
As the trial court did, we interpret those provisions to mean that any Labor Code penalties recoverable by state authorities may be recovered in a PAGA action by a person who was employed by the alleged violator and affected by at least one of the violations alleged in the complaint. Indeed, we cannot readily derive any meaning other than that from the plain statutory language, and Securitas does not offer a reasonable alternative for what those provisions mean when read together.
Slip op., at 5-6. After this, the Court spent a lot of time rejecting arguments that it should look to the legislative history (the Court held that when a statute is clear, it is not to consider legislative history) and other arguments about absurd results. It rejected all of those arguments.
Of course, in good Apple presentation fashion, this case has a couple of items that qualify as a "one more thing" moment. One of those moments included the following:
Section 2699, subdivision (f) creates a civil penalty for any Labor Code violation for which a penalty is not provided elsewhere in the law. The penalties under section 2699, subdivision (f) are “one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.” Securitas posits that using the definition of aggrieved employees in section 2699, subdivision (c) to calculate those penalties would allow over-counting in some cases to include weeks worked by employees affected by just one of the Labor Code violations alleged in the complaint, even if it is not the one giving rise to the penalties imposed by section 2699, subdivision (f). To the contrary, it is entirely possible to harmonize the two provisions. The method of calculation under section 2699, subdivision (f) imposes penalties based on the total number of employees that have been affected by an employer’s Labor Code violations. Though Securitas calls that “over-counting,” it is not impermissible for the Legislature to impose penalties measured in that way. Even if the method of calculation provided for by section 2699, subdivision (f) is something of a blunt instrument, it is not our role to rewrite the statute. (People v. Garcia (1999) 21 Cal.4th 1, 14.) Separation of powers principles require us to interpret the law as written, “and leave for the People and the Legislature the task of revising it as they deem wise.” (Id. at p. 15.) We also note that PAGA gives a court broad discretion to “award a lesser amount than the maximum civil penalty amount … if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory.” (§ 2699, subd. (e)(2).) So the statute incorporates a remedy if the penalty calculation is unfair or arbitrary as applied to a particular employer.
Slip op., at 12-13. Let that sink in for a moment. If I am not imaging things, I believe that this means that for subdivision (f) penalties, the Court held that the correct method of counting up the penalties would be to count the total number of employees that qualify as "aggrieved" by any violation an multiply that number by the $100 or $200 penalty. Oh my. So, if this stands the test of time, more employers will avoid class actions with class waivers in their arbitration agreements, but if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal. Big winner? The LWDA. For California employers in the long run it will likely be a slight loss. While Epiq will cut into class actions, that will be countered with larger penalty recoveries. And since the statutory period is just one year, an employer that doesn't fully correct issues will see plaintiffs returning to that well with regularity.
Respondent and Plaintiff was successfully represented by Michael Millen.
UPDATE: In response to a question about my post, I want to clarify something that is potentially unclear. When I wrote, “…if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal,” I was referring to the penalty look-back period of one year prior to filing. In other words, I was not saying that a specific one year period was implicated by this decision. I was only observing that the penalties for a one-year statute of limitation could be high, compared to a four-year statute in a wage and hour class action (plus whatever time passes while a case is pending).
The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.
