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California Supreme Court Holds Employees Retain Standing To File PAGA Claims Even After Settling And Dismissing Their Individual Labor Code Claims
The California Supreme Court recently addressed the issue of whether an employee, Justin Kim, retained standing to bring a claim under the Private Attorneys General Act (PAGA) after settling his own Labor Code claims against his employer, Reins International California, Inc. (Reins). Kim, who worked as a training manager and was classified as an exempt employee, filed a class action against Reins, alleging that he and other training managers were misclassified. Kim asserted causes of action for failure to pay overtime wages, provide meal and rest breaks, and provide accurate wage statements as well as waiting time penalties, unfair competition, and civil penalties under PAGA.
Because Kim’s claims were subject to an arbitration agreement between the parties, Reins filed a motion to compel arbitration, dismiss the class claims, and stay the PAGA claim until after arbitration was complete, which the court granted. Kim and Reins then settled all of Kim’s individual claims and Kim’s PAGA claim proceeded. However, Reins successfully argued that Kim’s PAGA claim could not proceed because, while Kim initially had standing to bring the PAGA claim, he lost his standing once he settled his individual claims because was no longer an “aggrieved employee.” Kim appealed.
PAGA allows aggrieved employees to pursue civil penalties against an employer for certain violations of the Labor Code on the state’s behalf. An aggrieved employee is one “who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” To sue under PAGA, an aggrieved employee must first notify the employer and the Labor and Workforce Development Agency (LWDA) of the facts and basis for the claim and, if the LWDA does not investigate, issue a citation, or respond with 65 days, the employee may sue. While an aggrieved employee is the party that brings a PAGA claim, it is not a dispute between the employee and the employer; rather, it is “a dispute between an employer and the state.”
The Court concluded that Kim met the requirements to have standing to bring the PAGA claim because Kim was an employee of Reins and he alleged he suffered a Labor Code violation committed by Reins. The Court also found that the settlement of Kim’s individual claims did not strip him of standing to pursue a PAGA claim on behalf of the state.
The Court explained that the Legislature intended PAGA to have an expansive approach to standing to serve the state’s interest in vigorous enforcement. To that end, the Legislature defined PAGA standing in terms of violations and not whether an individual’s claims have or have not been already remedied. The Labor Code violations Reins committed against Kim were not ified by Kim’s settlement; i.e., “[t]he remedy for [the] Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself.” Kim remained an aggrieved employee because Reins’ violation remained. The Court held that Reins’ argument that Kim lost standing when he settled his individual claims was inconsistent with the Legislative intent, Legislative history, and statutory language of PAGA. Accordingly, the Court remanded the case to the trial court for further proceedings on Kim’s PAGA cause of action.
Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73.
Employers should be aware that the decision in Kim v. Reins International California allows employees to bring PAGA claims against their employer even after the parties resolve Labor Code violations through settlement, arbitration, or other means. Therefore, employers may still be exposed to liability for civil penalties even after resolution of employees’ individual claims.