United States: California Supreme Court Prohibits Trial Courts From Striking PAGA Claims Due To Unmanageability

On January 18, 2024 in Estrada v. Royalty Carpet Mills, Inc. (Cal., Jan. 18, 2024, No. S274340) 2024 WL 188863, the California Supreme Court resolved a split in authority among the California Courts of Appeal regarding whether or not trial courts have the inherent authority to dismiss Private Attorneys General Act ("PAGA") claims due to unmanageability. The Supreme Court held that trial courts do not have this authority, and instead must address manageability concerns by using the variety of "tools" at their disposal, such as placing limitations on testimony and types of evidence and using representative testimony and surveys.

For employers, this decision renders an already challenging PAGA litigation landscape increasingly so. PAGA allows a plaintiff, standing as a "private attorney general," to pursue penalties on behalf of the state for alleged Labor Code violations against a cohort of "aggrieved employees," with 25% of the proceeds going to the aggrieved employees and 75% of the proceeds going to the state. The statute creates a representative action, somewhat akin to a class action proceeding, but without the traditional class certification requirements such as typicality or commonality. For example, unlike in a class action, a plaintiff bringing a PAGA claim may bring claims based not only on Labor Code violations allegedly committed against the plaintiff, but also for any other Labor Code violations allegedly committed against other employees – regardless of whether those same types of violations were committed against the plaintiff. All the plaintiff needs to do is allege that some Labor Code violation was committed against her or him, and then the Plaintiff can assert any other Labor Code violations allegedly committed against other employees in the same action.

Manageability is now another class certification requirement that PAGA plaintiffs will be able effectively to bypass. Prior to the Supreme Court's decision, the California Courts of Appeal disagreed on whether manageability was a viable basis for striking PAGA claims. In Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal.App.5th 746, the Court of Appeal affirmed the trial court's decision granting the employer's motion to strike a PAGA claim as unmanageable, holding that trial courts have inherent authority to ensure manageability of PAGA claims at trial and to strike unmanageable claims. The Court of Appeals in Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685 disagreed, and its decision was ultimately affirmed by the California Supreme Court.

Employers should keep this decision in mind as they assess the litigation risk posed by PAGA claims in California. They should likewise continue to periodically review their employment policies and wage and hour practices in an effort to reduce the risk of facing PAGA claims and their attendant challenges.

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