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PAGA Manageability Requirement: A Split of Authority in California

4/15/22

By: Adam G. Khan

On March 23, 2022, the California Court of Appeal based in Orange County held in Estrada v. Royalty Carpet Mills, Inc., 2022 Cal. App. LEXIS 237 a trial court “cannot dismiss a PAGA claim based on manageability.”  The decision dealt California employers another blow in responding to Private Attorneys General Act (PAGA) claims, and is inconsistent with the ruling issued last year from a different District Court of Appeal based in Los Angeles, which held trial courts may limit or strike unmanageable PAGA claims.  The California Supreme Court might accept review of Estrada, and address the inconsistent views of the two appellate courts, or it may order the Estrada decision “depublished,” meaning it cannot be cited as legal precedent. 

Under PAGA, a private plaintiff brings a civil lawsuit on behalf of the State of California, and certain groups of employees, seeking the imposition of penalties on employers who violate certain labor laws.  The proceeds are then shared between the State (75%) and the identified employee groups (25%), after attorneys’ fees and costs are paid.  PAGA lawsuits are not technically “class action” claims. An outstanding question has been whether a trial court may deny remedial relief due to the difficultly in determining whether all employees are impacted by the alleged violations, or impacted in the same way, such that a collective or representative approach to resolving the claims is improper. 

Last year, the Los Angeles-based Court of Appeal in Wesson v. Staples the Office Superstore, LLC, held trial courts have authority to ensure PAGA claims are manageable, and may limit or strike unmanageable PAGA claims. The Orange County-based Court of Appeal in Estrada disagreed, noting PAGA claims are not the same as class action lawsuits, which are a “procedural device for aggregating claims when the parties are numerous, and it is impracticable to bring them all before the court.”  The Court in Estrada noted PAGA claims are different from conventional civil suits in that they are enforcement actions through which a private plaintiff acts as proxy for the Labor Workforce and Development Agency to enforce governing labor laws. 

Given these distinctions, Estrada concluded requiring PAGA claims to be “manageable” would “graft a crucial element of class certification on PAGA claims,” allegedly undercutting prior California Supreme Court holdings.  The Court reasoned, “Imposing a manageability requirement would create an extra hurdle in PAGA cases that does not apply to LWDA enforcement actions.  This would undermine PAGA’s purpose as an administrative enforcement action conducted in court on behalf of the state by an aggrieved employee.”   

The Court of Appeal in Estrada acknowledged the Wesson Court’s concerns about unmanageable claims in cases that involve “hundreds or thousands of alleged aggrieved employees, each with unique factual circumstances.” The Court suggested that “courts may, where appropriate and within reason, limit witness testimony and other forms of evidence when determining the number of violations that occurred and the amount of penalties to assess,” adding that counsel involved in such cases could then “work with the trial courts during trial planning to define a workable group or groups of aggrieved employees,” including by “narrowing alleged violations to employees at a single location or department.”   

This suggestion in Estrada may not be feasible.  Such limitations might reduce the scope of recoverable penalties, and therefore the potential size of an attorneys’ fee award.  This would create a disincentive for cooperation by plaintiffs’ attorneys.  A further concern is that opposing counsel rarely “agree” on size or scope of impacted employees, leading the trial judge to become once again involved in “manageability” issues due to the absence of insurance coverage for amounts that may be owed, leaving employers facing the difficult choice of how to proceed.   

Pending further action by the California Supreme Court, or a possible rehearing by the Court in Estrada, trial courts will be able to choose which line of cases to follow; California does not require trial courts to follow decisions of the Court of Appeal from their District.  Employers and their counsel should, therefore, always seek to raise and rely upon Wesson, and raise the practicality limitations of Estrada in their briefings.

For additional information on this topic, please contact Adam G. Khan at [email protected]fmglaw.com.