Employee Who Settled Individual Wage Claims Cannot Pursue PAGA Claim

By Joanne Deschenaux January 11, 2018
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Employee Who Settled Individual Wage Claims Cannot Pursue PAGA Claim

If an employee brings both individual claims and a representative claim under the California Private Attorneys General Act (PAGA) in a single lawsuit, and then settles the individual claims, the plaintiff is no longer an "aggrieved employee" and therefore can no longer pursue the PAGA claim, the California Court of Appeal ruled.

Reins International California Inc. operates restaurants in California. Reins employed Justin Kim as a training manager, a position Reins classified as exempt from overtime requirements. Kim sued Reins, alleging that training managers were salaried employees who worked between 50 and 70 hours per week and should not have been classified as managers because they never performed any managerial tasks.

Kim brought individual and class claims seeking damages for the company's alleged failure to pay wages and overtime, failure to allow meal and rest periods, and failure to provide proper wage statements. He also sought civil penalties under PAGA—which allows aggrieved employees to bring representative actions to recover statutory penalties for state labor code violations.

[SHRM members-only toolkit: Preventing Unlawful Workplace Retaliation in California]

Kim signed an arbitration agreement when he began working for Reins in 2013. Based on this agreement, Reins moved to compel arbitration of Kim's individual claims, to dismiss the class claims and to delay trial of the PAGA cause of action until arbitration was complete. The trial court granted the motion to compel arbitration of the individual claims and to delay the trial of the PAGA claim.

While arbitration was pending, Kim accepted a settlement offer from Reins, which resulted in the dismissal of his individual claims and the class claims. The court set a date for trial of the PAGA cause of action.

Reins sought dismissal of Kim's PAGA claim, arguing that because Kim had dismissed his individual causes of action against Reins, he was no longer an "aggrieved employee" under PAGA and therefore could not maintain the PAGA claim. Kim opposed the motion, asserting that he did not lose his right to sue under PAGA by settling his individual claims against Reins.

The court granted the motion to dismiss the PAGA claim, and Kim appealed.

Who Can Bring a PAGA Lawsuit?

The California Legislature enacted PAGA in 2003. A PAGA action is "fundamentally a law enforcement action designed to protect the public and not to benefit private parties," the court noted. PAGA allows a private citizen to pursue civil penalties on behalf of the state's Labor and Workforce Development Agency and is distinct from an individual or a class action in which the plaintiffs are seeking monetary damages for themselves.

To bring a PAGA action, the employee must have suffered some harm. An action may be brought "by an aggrieved employee on behalf of himself or herself and other current or former employees," according to the act. An aggrieved employee under the act "means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed."

The court noted that Kim was clearly an aggrieved employee at the time his complaint was filed. However, the court concluded that he did not continue to be "aggrieved" once his individual wage and hour claims had been settled and dismissed.

The court said the statute's legislative history makes clear that it was not intended to allow an action to be prosecuted by any person who did not have a grievance against his or her employer for labor code violations. Here, Kim initially asserted that he had been harmed by the company's alleged violations of the law. But by accepting the settlement and dismissing his individual claims against Reins, Kim no longer was "aggrieved" within the meaning of the statute. The trial court properly dismissed the PAGA claim, the appellate court ruled.

Kim v. Reins International California Inc., Calif. Ct. App., No. B278642 (Dec. 29, 2018).

Professional Pointer: Kim's settlement of his claims only affected his ability to serve as a PAGA representative. It did not prevent another aggrieved employee from pursuing a PAGA lawsuit.

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

 

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