Seyfarth Synopsis: When an allegedly aggrieved employee attempts both to seek compensatory relief as an individual and to impose penalties as a proxy for the California Labor Commissioner under the Private Attorneys General Act of 2004 ("PAGA"), the resulting comingling of the plaintiff's interests as an individual and as a representative in the shoes of the State of California is another unsurprising byproduct of the PAGA statutory scheme. Some plaintiffs try to argue that results in one role don't affect the other, but another court recently reminded plaintiffs that resolving their individual claims also resolves their ability to pursue representative PAGA claims.
Judge Kenneth Freeman recently confirmed that a representative plaintiff's role as a proxy for the State of California is not unconditional and requires that the plaintiff be an "aggrieved employee." In the recent case, the plaintiff had originally filed both class action claims as well as a representative PAGA claim alleging exempt misclassification against his employer. After being compelled to arbitrate individual wage and hour claims while the representative PAGA claim was stayed, the plaintiff accepted a statutory offer to compromise under California Code of Civil Procedure Section 998, which dismissed all but his PAGA claim with prejudice.
In refusing to dismiss his PAGA claim, the plaintiff argued that his dual role as an individual and representative of the State of California meant that the dismissal of his individual claims had no impact on his ability to continue as a PAGA representative. The defendant disagreed and filed a motion for summary adjudication. Judge Freeman sided with the employer and made clear that once the plaintiff settled his individual claims, he was no longer an "aggrieved employee" under PAGA and, therefore, no longer had standing to bring a representative claim.
Judge Freeman is not alone in his view. The California Court of Appeal has previously concluded that a plaintiff who released any individual wage and hour claims he may have against his employer as part of a class action settlement cannot subsequently bring a PAGA claim based on the same alleged violations.
Since a PAGA claim can only be brought by and on behalf of "aggrieved employees," Judge Freeman's decision is helpful beyond just resolving claims with a PAGA representative. It also suggests "Pick Up Stix" campaigns—where an employer settles claims with individual putative class members to reduce the potential liability in the class action itself—should also be viable in PAGA lawsuits. Settling non-parties' underlying wage and hour claims should mean that current or former employees who have chosen to participate in the campaign would no longer be "aggrieved employees" for purposes of PAGA.
Considering that PAGA claims cannot be waived in arbitration agreements and are not subject to class certification requirements, employers facing PAGA claims may feel that the courts stack the odds against them. But the recent decision from Judge Freeman provides an encouraging reminder that employers may be able to use settlements as an effective litigation strategy in PAGA actions.
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