182 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com other words, where an employer concedes (or lacks a genuine dispute) that it owes an employee wages, it cannot obtain a release of that claim by paying less than the undisputed amount owed. But where the employer has a good faith defense to wage claims and seeks to compromise them with a member of a putative class in an ongoing class action, such a settlement would not be invalidated by Labor Code section 206.5. It should be emphasized that the above decisions arose under facts where the employer took pains to ensure it did nothing in its individual settlement efforts that could be viewed as coercive conduct. As the law currently stands, employers who are careful to be fair may settle individually with class members and enforce the releases obtained as a result. Notwithstanding that ability, employers must be very careful not to overreach and attempt to settle these cases in a coercive manner or at an unreasonable discount, as those sorts of facts may yield a less favorable outcome for employers in the next case. Further, employers settling individual employee claims must also carefully consider how much security they are receiving from an individual settlement. For instance, in Kim v. Reins International California, Inc., the California Supreme Court held that individuals who settle their own Labor Code claims can still pursue PAGA representative claims.901 In Reins, the parties agreed to settle the plaintiff’s individual claims, while carving out from the settlement a pending PAGA claim. The defendant then moved for summary judgment on the PAGA claim, arguing that the plaintiff’s rights had been “completely redressed” by the settlement and that he was no longer an aggrieved employee” eligible to sue under PAGA. Rejecting the defendant’s argument, Reins concluded that an employee need not have an unresolved injury to pursue a PAGA claim. Instead, aggrieved employees retain standing to sue so long as they have allegedly suffered a relevant Labor Code violation. Settling an individual claim for such a Labor Code violation does not make the employee any less aggrieved.902 Reins did not address what happens when an employee settles the employee’s own PAGA claim. Rather, the settlement in Reins expressly excluded the pending PAGA claim. It thus remains unresolved whether a PAGA plaintiff would be precluded from bringing a representative PAGA claim if the PAGA plaintiff agreed to settle it along with individual Labor Code claims.903 Regardless, Reins hour laws in the past”; and do not “purport to exonerate [the employer] from future violations.”); Watkins v. Wachovia Corp., 172 Cal. App. 4th 1576, 1586-87 (2009) (same). 901 9 Cal. 5th 73 (2020). 902 Accord Johnson v. Maxim Healthcare Services, Inc., 66 Cal. App. 5th 924 (2021) (a plaintiff with time-barred individual Labor Code claims still may have standing to sue under PAGA). 903 Grande v. Eisenhower Medical Center, 44 Cal. App. 5th 1147 (2020), aff'd, 13 Cal. 5th 313, 512 P.3d 73 (2022), is another case illustrating the importance of a settlement agreement’s details. There, a staffing company settled a class action with an employee who was placed at a hospital client. The settlement agreement did not expressly release claims against the hospital, and after settling with the staffing company, the employee separately sued the hospital on the same claims. Grande held that the second case could proceed, in part because the staffing company’s settlement agreement did not release claims against the hospital. The agreement did not expressly include the hospital as a releasee, and the more general release of claims against the company’s agents did not apply to the hospital. A dissenting opinion noted that another case reached the opposite conclusion—a staffing agency’s client was the staffing company's agent, and therefore within the scope of the release that the employees had given. Because the California Supreme Court has granted review in Grande, its lasting effect remains uncertain.
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