Employers take note: A California appellate recently court ruled that Private Attorneys General Act ("PAGA") claims by employees against employers for wage & hour and other claims survive the employer's (and by implication, the employer's responsible individual's) bankruptcy – they are not discharged and must be paid, even after the bankruptcy. PAGA permits aggrieved employees to file a representative action (like a class action) to recover civil penalties for Labor Code violations. The penalties against employers can add up to tons of money. Tons.
Of the sums adjudged due, statutes say that the sums are allocated 75% to the California Labor and Workforce Development Agency ("LWDA") to be used for "enforcement of labor laws" and "education of employers and employees about their rights and responsibilities," and 25% to the represented employees. Because the amounts payable to the LWDA qualify as penalties "payable to and for the benefit of a governmental unit," the bankruptcy court found that the PAGA sums to LWDA are nondischargeable in bankruptcy under a specific bankruptcy statute: 11 U.S.C. § 523(a)(7). So, while the 25% payment to employees and statutory attorneys fees for prosecuting the PAGA claims may be discharged through a bankruptcy, the remaining 75% of the award must be paid, even after the employer company and/or responsible individual emerges from bankruptcy. The case is:In re Patacsil.
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