Today the California Supreme Court reigned in the increasing “deputy” power of workers by ruling that workers cannot collect civil penalties on underpaid wages under the Private Attorneys General Act (PAGA). As a refresher, PAGA allows individual workers to seek civil penalties for Labor Code violations on behalf of the state. Lab. Code § 2699(a). In other words, PAGA “deputizes” employees to enforce Labor Code violations against their employers as if they were the Labor Commission itself.
This case raised two issues: (1) whether the employee could ignore an arbitration agreement to pursue a PAGA action, and (2) whether the employee could recover a civil penalties under Labor Code section 558 (underpaid wages) through a PAGA action. To the first, the California Supreme Court confirmed its previous holding in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, that an employee cannot waive the right to bring a PAGA claim and so an arbitration agreement forgoing PAGA claims is unenforceable.
To the second, the California Supreme Court concluded that the employee could not recover civil penalties for underpaid wages through a PAGA action. The Court found that civil penalties under Labor Code section 558 (underpaid wages) was limited to the Labor Commissioner only and not a private right of action. The Court reasoned that civil penalties do not prevent an employee from reclaiming unpaid wages owed but that allowing civil penalties for unpaid wages was inconsistent with statutory construction, legislative history, and harmony with similar statutes, namely Labor Code section 1197.1 (minimum wage).
To be clear, today’s decision does not eliminate an employee’s ability to sue for underpaid wages, the Court decision curtails the ability to recover civil penalties under the statute. For the full opinion, visit here. To learn about other topics in PAGA, visit here and here.
COUNSEL TO MANAGEMENT:
As we have reported before, plaintiff attorneys are increasingly asserting PAGA claims resulting in significant liability to employers. The California Supreme Court decision today takes one positive step towards reigning the deadly multiplier effect of PAGA on employers however employers should continue to engage in revisiting policies for compliance and best practices with the assistance of competent counsel. Employers facing PAGA lawsuits are encouraged to reach out to the experts at Dowling Aaron Incorporated.
Today’s decision also highlights one of the benefits of having properly drafted arbitration agreement. Enforceable arbitration agreements must have compliant language and be executed carefully with employees. The experts at Dowling Aaron Incorporated are available to help you implement a legally compliant and effective arbitration policy and discuss the impact the recent Supreme Court ruling could have on your business.