The California Supreme Court ruled on March 12, 2020 that an individual plaintiff’s settlement of their claims against an employer for purported wage and hour violations does not deprive that plaintiff of standing as an authorized representative in a Private Attorney General’s Act (PAGA) action.

PAGA deputizes an employee to file a lawsuit for purported California Labor Code violations against their employer to recover civil penalties on behalf of themselves, other similarly situated employees and the State of California. To pursue a PAGA action, the plaintiff must have standing as an “aggrieved employee.” PAGA defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”

In Kim v. Reins International California, Inc., March 12, 2020, Case No. 5246911, Justin Kim, an employee of Reins International (Reins), brought a putative class action and PAGA representative action for Labor Code violations against his employer. While the case was pending, Reins moved to compel arbitration as to Kim’s individual claims and dismissed the class action claims based on the arbitration agreement. While the PAGA litigation remained in the trial court, the trial court stayed the action pending the arbitration of Kim’s individual claims. Kim ultimately settled his individual claims and dismissed them, leaving only the PAGA claim for resolution. Reins then moved for summary adjudication of the PAGA claim on the ground that Kim was no longer an aggrieved employee and his rights had been “completely redressed” by his own settlement and dismissal of his underlying claims. The trial court granted the dismissal and the Court of Appeals affirmed.

The California Supreme Court reversed the lower court’s decision, holding that an employee may still be considered an aggrieved employee capable of bringing a PAGA claim despite settling their own underlying wage and hour claims. In reviewing the language of the PAGA statute and the legislative history, the court concluded, “[t]he statutory language reflects that the Legislature did not intend to link PAGA standing to the maintenance of individual claims.”

The court further distinguished a PAGA action from a class action, noting that, in a class action, the representative plaintiff who voluntarily settles their claim no longer has an interest in the class and may lose the ability to represent the class. Conversely, PAGA actions have no individual component and the plaintiff only brings the action as a representative of the state of California on behalf of all affected employees. The court explained that Kim had standing to maintain the PAGA action because he was an employee and may have experienced a Labor Code violation. The later settlement of his claims, which resolved his own underlying wage and hour damages, did not remove him from the “aggrieved employee” definition under PAGA.

The Court further explained that employees “who are subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every violation.”

The ruling appears to reverse numerous lower court and Ninth Circuit decisions and significantly expands the scope of who can maintain a suit under PAGA. While the full implications of this ruling remain to be seen, employers should no longer expect to completely dispose of PAGA claims by settling with the representative and should work closely with their Reed Smith Labor and Employment team to navigate defense and potential settlement of such claims.