98 Litigating CA Wage & Hour Class and PAGA Actions (24th Edition) Seyfarth Shaw LLP | www.seyfarth.com contained no requirement that the plaintiff exhaust administrative remedies before filing suit. However, PAGA now requires exhaustion of administrative remedies as a result of amendments adopted in August 2004. Seyfarth Shaw has estimated that PAGA created a new right to recover penalties on more than 100 Labor Code provisions, several of which are quite obscure. Even though the limitations period for a penalty claim is only one year,477 the effect of these penalty provisions can be significant. Suppose, for example, that an employer of 150 employees is sued for a repeated violation of some obscure Labor Code section, and the violation affected each employee over the course of one year—during each of 26 biweekly pay periods. In this example, the employer could be subject to penalties of more than $700,000.478And because employees argue that penalties are cumulative for distinct Labor Code violations, the amount of penalties could double or triple if there are multiple, recurrent Labor Code violations.479 Attorney’s fees to the prevailing plaintiff would augment that total.480 When Arnold Schwarzenegger became governor in 2004, one of his first initiatives was to repeal PAGA. Although his attempt at total repeal was unsuccessful, he and the Legislature did scale back a few of PAGA’s most controversial provisions and inserted some additional procedural protections. SB 1809, signed into law in August 2004, effected the following changes to PAGA: • The bill repealed the requirement (formerly in Labor Code section 431) that employers file a copy of their job application forms with the Division of Labor Standards Enforcement. 477 Code Civ. Proc. § 340(a) (one-year statute of limitations on statutes to recover a penalty); Brown v. Ralph’s Grocery Co., 28 Cal. App. 5th 824, 839 (2018). 478 $15,000 ($100 x 150 employees) for the first pay period and then $30,000 for each of the 25 following pay periods, if the $200 penalty is found to apply for all later pay periods. However, where an employer has a good faith belief that its conduct does not violate the Labor Code, it should be able to demonstrate that the proper penalty is $100 for each pay period, but under that scenario the employer would still be liable for $390,000 ($15,000 x 26 pay periods). See Amaral, 163 Cal. App. 4th at 1209 (“initial” violation encompassed violations covering multiple employees for multiple pay periods, up until such time as “the employer has learned that its conduct violates the Labor Code,” at which point “the employer is on notice that any future violations will be punished just the same as violations that are willful or intentional,” meaning the penalty rate will be doubled). In Bernstein v. Virgin Am., Inc., 3 F.4th 1127, 1144 (9th Cir. 2021), cert. denied, 142 S. Ct. 2903 (2022), the Ninth Circuit held that “ ‘a good faith dispute’ that an employer is required to comply with a particular law ‘will preclude imposition of heightened penalties.” In reversing the district court’s holding that the defendant was subject to the heightened penalties, the Ninth Circuit reasoned that the defendant “was not notified by the Labor Commissioner or any court that it was subject to the California Labor Code….” Id. at 1144. 479 As the law is not clear on this, employers argue that aggrieved employees are entitled to only one penalty per pay period. Several trial court rulings have held that multiple PAGA penalties may not be “stacked” one upon the other in connection with the same violation. See, e.g., Snow v. United Parcel Services, Inc., No. EDCV 20-025 PSG (AFMx), 2020 WL 1638250, *3 (C.D. Cal April 1, 2020) (“plaintiffs may only recover a set of civil penalties for each type of violation”); Castillo v. ADT, LLC, No. 2:15-383 WBS DB, CV 2:15-383 WBS DB, 2017 WL 363108, at *4 (E.D. Cal. Jan. 25, 2017) (“[PAGA] penalties cannot be ‘stacked’ on top of each other”); Smith v. Lux Retail N. Am., Inc., No. C 13–01579 WHA, 2013 WL 2932243, *3–4 (N.D. Cal. June 13, 2013) (court rejected the notion that Plaintiffs could “pile one [PAGA] penalty on another for a single substantive wrong” as “impermissible”); accord Sanchez v. McDonalds Restaurants of California, Inc., No. BC499888, 2017 WL 4620746 (LA Super. Ct. July 6, 2017) (declining to stack penalties arising out of the same conduct). Under the 2024 amendments to PAGA, Labor Code section 2699(h)(3)(i) now explicitly prohibits stacking of PAGA penalties for violations of sections 201-203, 204, and 226. However, by expressly stating that stacking is not available in these limited circumstances, the statute now implicitly allows stacking in other circumstances. 480 Lab. Code § 2699(k).
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