Kelly A. Knight is an attorney and mediator based in Los Angeles, CAlifornia. He handles matters throughout California.

Cal Supremes grant review in closely watched Kim v. Reins, which held that settling individual wage-hour claims results in destruction of standing to prosecute an enforcement action under the PAGA

Big news: the California Supreme Court has granted review of Kim v. Reins, 18 Cal. App. 5th 1052 (Dec. 29, 2017) (links to appellate opinion here and Supreme Court docket here). 

Kim was an appeal coming out of Judge Freeman's courtroom in the Los Angeles Superior Court, Central Civil West. In Kim, the plaintiff filed a purported wage-and-hour class action with accompanying PAGA and 17200 claims. The trial court granted a motion to compel arbitration and ordered the non-PAGA claims into arbitration while staying the PAGA and 17200 claims (as we all know, including from my prior posts, PAGA claims cannot be arbitrated, with the possible exception of a post-dispute, post-PAGA-exhaustion arbitration agreement). The plaintiff later accepted a statutory offer to compromise under Code of Civil procedure section 998 and dismissed all claims except the PAGA claim. The trial court then lifted the stay on the PAGA claim. Kim, 18 Cal. App. 5th at 1055-56.

The defendant then filed a motion for summary adjudication of the PAGA claim, arguing that because the plaintiff dismissed his individual wage-hour claims, he was no longer an "aggrieved employee" under PAGA (see Labor Code section 2699(a), allowing a PAGA enforcement action for recovery of civil penalties to be brought "by an aggrieved employee on behalf of himself or herself and other current or former employees"); the plaintiff argued that he did not lose standing to enforce provisions of the Labor Code via a PAGA enforcement action by settling his individual claims. The trial court granted the motion. Kim, 18 Cal. App. 5th at 1056.

The Court of Appeal affirmed: "We hold that where an employee has brought both individual claims and a PAGA claim in a single lawsuit, and then settles and dismisses the individual employment causes of action with prejudice, the employee is no longer an 'aggrieved employee' as that term is defined in the PAGA, and therefore that particular plaintiff no longer maintains standing under PAGA." Id. 

The Court of Appeal held that once the plaintiff dismissed all individual Labor Code claims, he "essentially acknowledged that he no longer maintained any viable Labor Code-based claims against Reins" (id. at 1058) and thus was no longer an aggrieved employee (id. at 1059).

One thing left incredibly unclear in the Kim opinion is the issue of Labor Code violations asserted in the PAGA-enforcement claim that are not asserted via individual claims. The PAGA created a statutory mechanism to enforce most provisions of the Labor Code via imposition and collection of a civil penalty---including Labor Code sections for which there is no private right of action, e.g., section 351 (prohibition on employer taking tips), 1174 (record-keeping requirements), etc. (both of which are expressly enforceable under PAGA (see Labor Code section 2699.5)). For Labor Code sections with no private right of action, this begs the question whether an employee may be aggrieved due to violations of those Labor Code sections despite not asserting (and not being legally able to assert) any individual wage-and-hour claims. (Unfortunately, there may not have been an LWDA exhaustion on such Labor Code provisions in the Kim case (provisions for which there is no private right of action to enforce), but the appellate court's interpretation still leaves the law with in this seemingly unintended state). 

And there are numerous other issues raised by the Kim opinion. For example, section 2699(c) defines "aggrieved employee"---right in the statute itself---as "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed." See Labor Code § 2699(c) (emphasis added). This appears to conflict with the appellate court's interpretation of "aggrieved employee" as only someone whom continues to assert a viable private, individual cause of action for violation of a Labor Code provision. 

And more, under the appellate court's interpretation, wouldn't an arbitration award on individual claims (regardless of how it turns out) result in final resolution of the individual claims such that there is no longer standing to assert the PAGA claim? For example, where an employee receives an arbitration award in his/her favor, what if the employer immediately pays the entire amount of the award before the employee comes back to the trial court to reopen the PAGA claim (or, of course, what if the arbitration award is in the defendant's favor with a finding of fact that no individual violations occurred)? Wouldn't that in effect result in a total inability to assert a PAGA claim in every case under the Court of Appeal's Kim opinion?

These issues and more will hopefully be clarified by the Cal Supremes.

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