Cal-Peculiarities: How California Employment Law is Different 2022 Edition

©2022 Seyfarth Shaw LLP  www.seyfarth.com 2022 Cal-Peculiarities | 125 Recovering wages as civil penalties. Although the California Supreme Court characterized a PAGA “action to recover civil penalties [as] fundamentally a law enforcement action designed to protect the public and not to benefit private parties, ” 443 s ome California decisions permitted PAGA plaintiffs to seek “underpaid wages,” under Labor Code section 558, as part of the civil penalty . 444 These decisions benefitted plaintiffs’ lawyers by saying that they did not have to choose between (1) pursuing lucrative claims for unpaid wages while running the risk that defendants would (a) remove the action to federal court and (b) enforce arbitration agreements with class-action waivers and (2) pursuing only civil penalties, in a PAGA action that would resist both removal and attempts to enforce arbitration agreements . 445 T he California decisions permitted plaintiffs’ lawyers to combine the best of both options by bringing a PAGA action to seek unpaid wages under Section 558, which authorizes the Labor Commissioner (and inferentially a PAGA plaintiff) to recover civil penalties and unpaid wages. The California Supreme Court brought this plaintiffs’ gravy train to a halt in 2019, holding that employees can use PAGA only to recover civil penalties, not to recover unpaid wages. The case arose when a bank employee, who had signed an arbitration agreement with a class-action waiver, avoided the waiver by suing only under PAGA, alleging failures to provide overtime and minimum wages, meal and rest periods, timely wages, adequate wage statements, and expense reimbursements. She argued that Section 558 entitled her to seek not only civil penalties for each underpaid employee for each pay period, but also the amount of underpaid wages. This ploy worked with the Court of Appeal, which held that a PAGA plaintiff invoking Section 558 could both avoid arbitration and recover unpaid wages, as a form of civil penalties recoverable through PAGA. The California Supreme Court agreed to review the case to decide whether the FAA preempts a state rule that would keep an arbitration agreement from applying to a PAGA claim for unpaid wages, but then decided to address a “more fundamental question”: whether a PAGA plaintiff can obtain unpaid wages under Section 558. The Supreme Court concluded that the unpaid wages recoverable under Section 558 are not civil penalties and thus are not recoverable in a PAGA action: only the Labor Commissioner can recover unpaid wages under Section 558. Thus, a plaintiff who sues only under PAGA can recover only civil penalties, and not unpaid wages . 446 Seeking wage statement penalties when there was no injury. The Court of Appeal has permitted plaintiffs to seek PAGA penalties for inadequate wage statements even where the wage statement statute itself (Labor Code section 226) would not authorize a penalty in light of the absence of any actual or even deemed injury . 447 (See § 16.3.1.) Suing penalties for Labor Code violations the plaintiffs themselves never experienced. A Court of Appeal decision permitted a security guard affected by only one Labor Code violation to assert PAGA claims on behalf of aggrieved employees for other Labor Code violations, even though the violations did not personally affect the plaintiff. The Court of Appeal acknowledged that this result conflicts with traditional rules of standing, but reasoned that those rules do not apply to a PAGA case, where the plaintiff is acting on behalf of the California Labor Commissione r. 448 Private suits for statutory penalties for untimely payment of wages and equal pay. A 2019 amendment makes claims for untimely payment of wages even more lucrative. The old law provided no private right to sue for untimely wage payments during employment: only the Labor Commissioner or a PAGA plaintiff could sue, for civil penalties, and those penalties went exclusively or mostly to the State of California. Accordingly, employees experiencing untimely payment of wages now can choose to seek either (1) civil penalties under PAGA (which would be split between the LWDA and aggrieved employees) or (2) statutory