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Litigation News

Litigation News | 2020

Settlement Does Not Bar Private Attorney General Suit

Mark Anthony Flores


  • Employer may not end-run state enforcement action through individual settlement.
  • PAGA does not operate like a class action because the parties and remedies are different. 
  • The court concluded that standing under PAGA did not require an employee to have an unredressed actual injury.
Settlement Does Not Bar Private Attorney General Suit
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An employee retains standing to seek civil penalties under the California Private Attorneys General Act (PAGA) even after settling his or her individual employment claims based on the same set of facts. In a case of first impression, the California Supreme Court made clear in Kim v. Reins International California, Inc. that PAGA does not operate like a class action because the parties and remedies are different. In a PAGA suit, the employee represents the state rather than other individuals and seeks to remediate and deter legal violations via statutory penalties rather than providing individual relief. Citing the statutory text and legislative purpose, the court concluded that standing under PAGA did not require an employee to have an unredressed actual injury.

The Settlement of the Individual Claims

Justin Kim, a training manager for restaurant operator Reins International California, Inc., filed a putative class action in state court alleging that he and other training managers had been misclassified as exempt from overtime laws, in violation of the California Labor Code. The operative complaint also sought civil penalties under PAGA. The parties settled all of Kim’s individual non-PAGA claims, which the trial court dismissed along with the class claims. Reins then moved for summary adjudication on the remaining PAGA cause of action, arguing Kim was no longer an “aggrieved employee” with the requisite standing to sue.

The trial court entered judgment for Reins, reasoning that since the settlement had already compensated him for his injuries, his rights were “completely redressed.” The appellate court affirmed the judgment.

Violation, Not Injury, Is Required for Standing under PAGA

The California Supreme Court reversed on appeal. It noted that the statute required only that “[t]he plaintiff must be an aggrieved employee, that is, someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” The court explained that “[t]he Legislature defined PAGA standing in terms of violations, not injury,” and thus, Kim acquired standing once the Labor Code violations were committed against him.

Nor did he lose that standing upon settlement, because “[t]he remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself.” It further observed that “the Legislature did not intend to link PAGA standing to the maintenance of individual claims” because the statute explicitly conferred standing upon an employee so long as he suffered “one or more of the alleged violations.”

Additionally, the court held that adding an injury requirement for standing would contradict PAGA’s purpose of increasing state agencies’ enforcement capabilities, “seriously impair the state’s ability to collect and distribute civil penalties,” and allow employers to avoid paying civil penalties through individual settlement. In so holding, the court distinguished between PAGA suits and class actions. It explained that “[t]here is no individual component to a PAGA action,” which are akin to state enforcement actions.

Essentially, the PAGA plaintiff is deputized to represent the state against an employer and seek recovery on behalf of all affected employees. Reins further stated that PAGA’s civil penalties “are intended to ‘remediate present violations and deter future ones’, not to redress employees’ injuries.” By contrast, class actions merely aggregate numerous individual claims, and that even though the class action plaintiff represents multiple people, ultimately, he or she possesses only his or her own claim. Thus, a class action plaintiff may no longer represent the class after settlement, because the settlement extinguishes the plaintiff’s interest in the class action.

Finally, the California Supreme Court concluded that an unredressed injury requirement would conflict with the recognized right of plaintiffs to bring stand-alone PAGA claims, as well as Labor Code provisions authorizing PAGA suits, but not a private right of action.

Section Leaders Weigh In

PAGA and class actions—though similar in form—are not similar in function, explains Adam E. Polk, San Francisco, CA, cochair of the ABA Section of Litigation’s Class Actions & Derivative Suits Committee. While a named plaintiff in a class action may serve as the representative for the entire class to assess the viability of the class members’ claims, the same does not apply for PAGA. “The PAGA statute is, by its very nature, representative. It makes sense, therefore, that someone that brings a PAGA action cannot compromise the claims of the persons that they are acting on behalf of,” observes Polk. “PAGA is just saying that there is harm that has been sustained by employees across the board. The employees, however, still have their individual actions though it is a separate type of relief,” he adds.

Dustin L. Crawford, Atlanta, GA, cochair of the Section of Litigation’s Employment Litigation Subcommittee of the Civil Rights Litigation Committee, also believes this case highlights protections available to employees from mandatory arbitration provisions and class waivers. Crawford notes, “PAGA is intended to level the playing field so that even when employers have mandatory arbitrations and class waivers, there is still a regulatory enforcement mechanism that the employer must be aware of.”