84 Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) Seyfarth Shaw LLP | www.seyfarth.com employees.”497 “If plaintiffs are unable to show widespread violations in an efficient and reasonable manner,” the Estrada court provides, “that will just reduce the amount of penalties awarded rather than lead to dismissal.” The split between Wesson and Estrada undoubtedly creates confusion for employers, which is likely why the California Supreme Court granted review of the Estrada decision on June 22, 2022. The California Supreme Court agreed to consider the following issue: “Do trial courts have inherent authority to ensure that claims under the Private Attorneys General Act (Lab. Code, § 2698 et seq.) will be manageable at trial, and to strike or narrow such claims if they cannot be managed?”498 At the moment, and until the California Supreme Court holds otherwise, Wesson is binding within the Second District, Estrada is binding within the Fourth District, and all other state and federal courts may swing either way. F. Release of PAGA Claims Through Class Settlement Plaintiffs’ lawyers generally try to avoid characterizing any money from a settlement as being attributed to PAGA claims,499 as three-quarters of any such money goes to the state. In some cases, plaintiffs’ counsel do not even allege PAGA claims. If the case settles, however, the employer generally insists that the release cover all claims arising out of the same underlying facts, including any claims for PAGA penalties.500 Otherwise, the employer would face the risk of a PAGA action on the same issues.501 A dispute may arise if a class member in a settled class action lawsuit that did not include PAGA claims later seeks to bring a PAGA action. The PAGA plaintiff could argue that the class representative had not exhausted administrative remedies under PAGA and thus never had a right to release PAGA claims. Rather, until administrative remedies are exhausted, the PAGA plaintiff could argue, the PAGA claim is the property of the state. In short, the PAGA plaintiff argues that a prerequisite to a release of PAGA claims is the exhaustion of administrative remedies. The Court of Appeal addressed this issue in Villacres v. ABM Industries Inc.,502 which held that class members could indeed waive their right to pursue PAGA claims and that a judgment entered on such a class settlement 497 Id. 498 Estrada v. Royalty Carpet Mills, 511 P.3d 191 (Cal. 2022). 499 See Nordstrom Com’n Cases, 186 Cal. App. 4th 576, 589 (2010) (affirming trial court’s approval of a class wide settlement that apportioned zero dollars to PAGA claims); Magadia v. Wal-Mart Assocs., Inc., 384 F. Supp. 3d 1058, 1100 (N.D. Cal. 2019), rev'd in part, vacated in part, 999 F.3d 668 (9th Cir. 2021) (court could not find any case that awarded a PAGA penalty so disproportionately high relative to applicable statutory damages; “in wage and hour class action cases that settle, which are the overwhelming majority of such cases, very little of the total settlement is paid to PAGA penalties in order to maximize payments to class members”). But see O'Connor v. Uber Techs., Inc., 201 F. Supp. 3d 1110 (N.D. Cal. 2016) (rejecting preliminary approval of proposed settlement of PAGA claim where amount allocated to that claim represented only 0.1% of potential exposure). 500 In such circumstances, it may be advisable to negotiate, as part of a settlement, a requirement that the plaintiff amend his complaint to specifically plead a PAGA claim. 501 If a PAGA claim is alleged in an action, any settlement must be approved by the Court, even if no money is allocated to the PAGA claim. Lab. Code § 2699(l)(2) (prior to the 2016 amendment to PAGA, only settlements where money was allocated to PAGA required court approval). Furthermore, the notice of proposed settlement must also simultaneously be submitted to the LWDA. Lab. Code § 2699(l)(1). 502 Villacres v. ABM Industries Inc., 189 Cal. App. 4th 562 (2010).
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