LOS ANGELES (Legal Newsline) – California's Private Attorneys General Act is continuing to cause headaches for businesses as judges in the state attempt to handle lawsuits brought under it.

PAGA rules are changing, with plaintiffs lawyers more frequently filing wage and hour lawsuits for employees suing their employers, Jackson Lewis lawyer S. Sean Shahabi says.

There is plenty of "uncertainty for both businesses and attorneys when it comes to how courts treat and manage PAGA claims," Shahabi told Legal Newsline.

“While PAGA has been on the books for about 14 years, the law is relatively ‘undeveloped’ in that there are many procedural and substantive questions when it comes to PAGA that our appellate courts have yet to tackle and, in turn, provide guidance to trial courts, attorneys and their clients,” says Shahabi, of Jackson Lewis' Orange County office.

PAGA allows employees to not only sue their employers on their own behalf, but to pursue civil penalties on behalf of other employees.

Critics say a small violation can result in liability that balloons out of proportion because of the civil penalties allowed.

In Kim v. Reins International California, the 2nd Appellate District of California ruled Dec. 29 that an employee-plaintiff who had settled and dismissed his individual claims against his employer did not have standing for a PAGA claim on behalf of other aggrieved employees. 

The court ruled that since the employee-plaintiff had settled and dismissed his individual claims, he was no long an aggrieved employee under the law.

The evolution of how plaintiffs lawyers use PAGA means varying rulings from judges.

“A big part of the reason is that for many years since it first went into law in 2004, PAGA played a relatively minor role in wage and hour class action litigation in California, and therefore there wasn’t much motivation or need to raise issues under PAGA to the appellate courts,” Shahabi said.

However, in more recent years, PAGA has played a far more significant role in “representative” wage and hour litigation in California when one employee attempts to represent many, according to the attorney.

“We are seeing many cases in which PAGA is the only claim that the former or current employee files against their employer,” Shahabi said. 

“This is the result of a number of reasons including, most notably, the courts’ treatment of arbitration agreements and the enforcement of class action waivers, and the fact that under PAGA, plaintiffs can pursue significant civil penalties on behalf of the state and other ‘aggrieved employees' without meeting the requirements necessary to maintain a class action.”

The 2nd Appellate District panel of judges mulled over the meaning of "aggrieved" in the appeal.

“The parties do not dispute that Kim was employed by Reins,” according to the Dec. 29 opinion. “Kim alleged in his first amended complaint that he was a person against whom Labor Code violations were committed.”

Collins noted that pursuant to Kim’s charge, it did in fact seem as if he was an aggrieved employee at the time his complaint was filed.

“What is less clear, however, is whether Kim continued to be ‘aggrieved’ once his individual Labor Code claims had been settled and dismissed,” the court wrote.

“Kim’s lack of PAGA standing is unrelated to the court’s order to arbitrate the individual claims. Moreover, no findings were made by an arbitrator."

The case is just one of many that appellate courts will need to decide.

“Given that PAGA is playing a more significant role and in many cases is the centerpiece of ‘representative’ wage and hour litigation in California, I expect that we will see more and more appellate review and analysis of the many procedural and substantive questions under PAGA,” Shahabi said.

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