Wage and Hour Lawsuits: New Case Highlights ’Class Action’ Type of Exposure for Employers Under PAGA

A new California appeals court decision highlights
the relative ease with which an employee can sue you for Labor Code violations
and expand the lawsuit to cover not only the individual employee but also other
current and former employees. We’ll explain the new case and provide pointers
on how to avoid being a legal target.

Labor Code Violations
Alleged

Jose Arias sued his
former San Joaquin
County employer, Angelo
Dairy, for various Labor Code violations. He alleged that he wasn’t paid
overtime and didn’t receive meal or rest breaks during his shifts, and that
Angelo Dairy provided uninhabitable housing to its employees.

Arias filed the suit on
behalf of himself and as a representative of other former and current employees
of the dairy, but he didn’t file the case as a class action. These
representative claims were brought under two statutes: California’s Unfair Competition Law (UCL)
and the Private Attorneys General Act (PAGA).

Employer Says Class
Action Rules Apply

Angelo Diary asked the
court to toss out the representative claims because Arias hadn’t followed the detailed
rules for filing a class action lawsuit. Arias argued that both the UCL and
PAGA permit employees to file claims on behalf of others, without having to comply
with class action requirements.

UCL Claims Addressed in
Prop. 64

The appeals court has
now ruled that only the PAGA claim can go forward.1

The court explained that
the UCL prohibits business practices that are unlawful, unfair, or fraudulent.
For many years, an individual could file a representative action under the UCL
that wasn’t certified as a class action, even if that individual wasn’t harmed
by the alleged unfair business practice.

But in 2004, in response
to concerns that private attorneys were misusing the UCL to file large lawsuits
on behalf of the general public even when the plaintiff- client had not been
injured, California
voters passed Proposition 64. This law requires that the plaintiff have suffered
damages or injury. What’s more, Prop. 64 states that UCL representative
lawsuits must comply with California Code of Civil Procedure Section 382, a law
commonly understood to authorize class actions even though it doesn’t use the
term “class action.”

5

The court concluded that
the Prop. 64 requirement that a representative claim comply with Section 382 makes
it plain that a representative UCL claim may now only be pursued as a class
action. This is true, said the court, even though Prop. 64 on its face doesn’t
refer to class action rules. The court pointed to the voters’ intent, as
expressed in the official ballot pamphlet, that the  UCL be tightened up to require that
representative claims are brought as class actions. The pamphlet states: “This
measure requires that unfair competition lawsuits initiated by any person…on
behalf of others, meet the additional requirements of class action lawsuits.”

Looser PAGA Rules

The court came to a
different conclusion regarding representative actions under PAGA. It ruled that
PAGA’s authorization for private representative actions is an exception to the
class action requirement.

The court explained that
PAGA authorizes an aggrieved employee to sue on behalf of himself and other
current or former employees, as long as various notice procedures are followed
and “notwithstanding any other provision of law. …” What’s more, the idea behind
PAGA was that an aggrieved employee could act as a private attorney general to
collect penalties from employers that violate labor laws. This type of action
is, fundamentally, a labor law enforcement action and not a class action, the
court said.

Don’t Be a Target

Although this decision
doesn’t break new ground, it underscores the simplicity of filing a PAGA
representative lawsuit, as opposed to having to follow burdensome class action
procedures (including lengthy class certification proceedings and opt-out
procedures). Thus, California
employers should be aware that seemingly minor Labor Code violations can easily
be transformed into a massive lawsuit involving many current and former employees.

To avoid being a PAGA
target, take a close look at your policies and practices to make sure you’re
avoiding common types of violations. Here’s a quick checklist:

1. Make certain exempt
employees are properly categorized.

2. Avoid on-duty meal
periods for nonexempt employees.

3. Make sure nonexempt
employees take uninterrupted meal and rest breaks.

4. Train supervisors
about the importance of avoiding common PAGA violations.

_

1 Arias v. Superior Court
(Angelo Dairy), Calif.
Court of Appeals (Dist. 3) No. C054185, 2007