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Paul Zimmerman

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More PAGA Claims on the Horizon After Epic

The United States Supreme Court’s landmark decision in Epic Systems Corp. v. Lewis – enabling class action arbitration waivers in the employment context – might have an unintended consequence in the form of more Private Attorneys General Act (PAGA) cases filed in California. This is especially true after the recent California Court of Appeals decision in Huff v. Securitas Securities Services USA, Inc.

Huff Expands the Scope of PAGA Claims

In Huff, an employee of the security company, Securitas, sued for various Labor Code violations: failure of temporary services employer to pay wages weekly; failure to pay wages immediately upon termination of employment; failure to pay wages within 72 hours of resignation; and failure to pay all wages due for work performed in pay period. Moreover, the employee sought penalties via a representative action under PAGA for violations against him as well as other employees. By way of background, PAGA allows private parties to sue for civil penalties previously only recoverable by a state agency and to receive part of the recovery as compensation.

The Huff case was deemed “complex,” so its trial was set up in phases. In the first phase, the evidence suggested that Huff was not a temporary services employee and therefore Securitas could not have violated the Labor Code section requiring temporary services employers to pay wages weekly. The court then entered judgment for Securitas because – the trial court initially thought – Huff could not bring a PAGA claim for a violation that did not affect him personally. More specifically, since Huff was not deemed to be a temporary services employee, he could not bring a PAGA claim on behalf of temporary services employees for Labor Code violations. However, the trial court ultimately backtracked, concluding that as long as Huff could prove that he was affected by at least one Labor Code violation, he could bring a PAGA claim for other Labor Code violations that affected other employees.

The appellate court agreed. It held that any “aggrieved employee” (an employee affected by at least one Labor Code violation) may pursue penalties on behalf of California for unrelated violations by the same employer. And while this might sound like class certification, the appellate court was clear to highlight that “a representative action under PAGA is not a class action.” Instead, a PAGA claim is a “law enforcement action where the plaintiff acts on behalf of the state,” not on behalf of other employees.

Not mentioned in the case is the significant fact that the state will not have signed an arbitration agreement with the employer.

A PAGA-Sized Loophole

The U.S. Supreme Court’s decision in Epic Systems Corp. was largely considered a win for employers. (Read M&R’s take on the decision here.) In its wake, companies can use arbitration agreements to prohibit workers from bringing or participating in class or collective actions over workplace issues. But employers in California may want to temper any elation.

As described above, claims brought under California’s Private Attorneys General Act are not class actions – they are cases brought on behalf of California, with the suing employee acting as a “private attorney general.” And because California is not a party to private employers’ arbitration agreements, including class action waiver provisions, claims brought under PAGA can circumvent the Supreme Court’s decision in Epic – a loophole to be sure, one that the Huff decision has widened to the extent it enables an employee to sue his or her employer for alleged Labor Code violations suffered by other employees, even if the aggrieved plaintiff has suffered from an unrelated violation.

The upshot: despite the favorable ruling in Epic, California employers should look out for an increase in PAGA lawsuits.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.