California Worker Whose Individual Claim Is Time-Barred May Bring PAGA Suit

An employee's individual claim against her employer for a violation of the California Labor Code was time-barred, but she could still bring a representative action under the Private Attorneys General Act (PAGA), a California appeals court ruled.

The court based its decision on a 2020 California Supreme Court ruling (Kim v. Reins International California Inc.), which held that an employee who settles and dismisses individual labor code claims does not lose standing to pursue a PAGA claim.

The employer is a national health care staffing company that provides temporary staffing and health care services to its clients. The plaintiff was hired as an hourly, nonexempt employee in 2016. On Sept. 7, 2016, she signed a document entitled "Non-Solicitation, Non-Disclosure and Non-Competition Agreement."

On Sept. 9, 2019, the plaintiff filed a lawsuit claiming that because the agreement contained a noncompetition clause, it was illegal under California law. The complaint consisted of a single claim for penalties under PAGA on behalf of all employees who had signed the noncompete agreement.

PAGA allows aggrieved employees to sue over alleged labor code violations on behalf of themselves and other employees by stepping into the shoes of state regulators to recover civil penalties. 

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The trial court dismissed the plaintiff's lawsuit, concluding that the plaintiff could not bring an individual complaint against the employer because she signed the agreement more than three years before she filed suit, and the three-year statute of limitations for labor code violations therefore barred her claim. The trial court found that because she could not bring an individual claim, she was not entitled to bring a representative suit under PAGA.  

The plaintiff appealed.    

Nature of PAGA Claims

The appeals court first noted that the state legislature enacted PAGA in 2003 after finding that labor law enforcement agencies were understaffed and it was in the public interest to allow aggrieved employees, standing in for the agencies, to recover civil penalties for labor code violations.

A PAGA claim is legally and conceptually different from an employee's own suit for damages and statutory penalties, the court said. An employee suing under PAGA does so as the proxy or agent of the state's labor law enforcement agencies.

In addition, the civil penalties a PAGA plaintiff may recover on the state's behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations, the court said. Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action.  

Only an "aggrieved employee" has standing under PAGA. An aggrieved employee is any employee against whom one or more of the alleged violations was committed, the court said. Under PAGA, an aggrieved employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for labor code violations.

In this case, the court said, the plaintiff clearly was, at least at one time, an aggrieved employee under PAGA. The issue posed by the appeal was whether the fact that the plaintiff's claim was now time-barred prevented her from pursuing a representative claim under PAGA.

Based on the state high court's decision in Kim, the appeals court concluded that the plaintiff could go forward with her lawsuit. In Kim, the California Supreme Court held that an employee who settles and dismisses individual labor code claims does not lose standing to pursue a PAGA claim. The high court in Kim explained that the employee became aggrieved when one or more labor code violations were committed against him, and settlement did not nullify those violations.

The Kim court also observed that PAGA standing is not inextricably linked to the plaintiff's own injury. Employees who were subject to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation.  

The appellate court went on to say that, under Kim, the plaintiff in this case was an aggrieved employee with the legal right to pursue her PAGA claim. She is employed by the employer and has personally suffered at least one labor code violation on which the PAGA claim is based.

The fact that her individual claim may be time-barred does not nullify the alleged labor code violations nor strip her of her standing to pursue PAGA remedies, the court concluded.

Johnson v. Maxim Healthcare Services Inc., Calif. Ct. App., No. D077599 (July 21, 2021).

Professional Pointer: In addition to allowing lawsuits that might otherwise be barred, PAGA limits the types of claims employers can force into arbitration. Because a PAGA claim is seen as a dispute between an employer and the state, an employee's agreement to arbitrate individual claims does not also compel arbitration of PAGA claims.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.