On July 21, 2021, the Court of Appeal held an employee has standing to bring a PAGA claim on behalf of other employees even if her individual claim is time-barred. This ruling expands the pool of potential plaintiffs and continues the trend of increasing the risk employers will face in connection with PAGA claims.
The plaintiff in Johnson v. Maxim Healthcare Services, Inc. (“Johnson”) signed a “Non-Solicitation, Non-Disclosure and Non-Competition Agreement” on September 7, 2016. This agreement allegedly included a non-competition clause, which is prohibited under California law. Three years later, on September 9, 2019, she filed a complaint against her then-current employer, alleging that the employer violated California Labor Code § 432.5 by requiring her to sign the noncompete agreement. The complaint included a single cause of action for penalties based on this violation and the Private Attorney General Act of 2004 (“PAGA”). (Lab. Code, § 2698, et seq.)
The employer demurred to the complaint, arguing the employee’s individual claim was time-barred because she signed the noncompete agreement three years before she filed the complaint. The Superior Court sustained the demurrer, finding the plaintiff lacked standing to bring the PAGA claim because her individual claim was time-barred. The Court subsequently dismissed the action with prejudice.
The Court of Appeal reversed and explained that a PAGA claim is conceptually different from an employee’s individual causes of action because the employee suing under PAGA “does so as the proxy or agent of the state’s labor law enforcement agencies.” Accordingly, a PAGA claim is “a dispute between an employer and the state” rather than a dispute between the employer and the employee. While not every “private citizen in California can serve as the state’s representative,” the PAGA statute provides that any “aggrieved employee” has standing to bring a PAGA claim. The Court of Appeal concluded that any person who has ever been “aggrieved” may serve as the state’s representative, regardless of when the alleged injury occurred.
In reaching this conclusion, the Court of Appeal relied on Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, where the California Supreme Court held that an employee who settled and dismissed her individual Labor Code claims does not lose standing to pursue a PAGA claim. The Supreme Court explained that PAGA standing is neither “inextricably linked to the plaintiff’s own injury” nor “dependent on the existence of an unredressed injury, or the maintenance of a separate, unresolved claim.”
Accordingly, a PAGA claim may be brought by any employee who, at some point in history, was “employed by the alleged violator” and was affected by “one or more of the alleged violations.” (See Cal. Lab. Code § 2699.)
This decision should serve as yet another reminder that employers must update their company agreements, onboarding documents, and wage and hour policies to ensure they are compliant with current California law. When an employer receives a notice from the Labor & Workforce Development Agency, the employer should request assistance from counsel to consider all possible procedural and substantive defenses, as well as needed correction of any current practices, if any.
We have substantial experience in this area and have successfully litigated and resolved numerous PAGA and class action cases for our clients. If you are interested in discussing these issues, or have any questions about this blog, please feel free to contact us.