Employers in California might grimace when hearing about California Private Attorneys General Act (PAGA) claims. Case law surrounding PAGA is constantly developing, but progress has been made that provides employers with better options to defend against PAGA claims. The decision in Magadia v. Wal-Mart Associates, Inc., No. 19-16184 (May 28, 2021), from the US Court of Appeals for the Ninth Circuit is one such case, and more recently, Meza v. Pacific Bell Telephone Co., 79 Cal. App. 5th 1118 (2022) has applied a key holding in Magadia in a state court case.
The Challenge to Defend against PAGA Claims before Magadia v. Wal-Mart
PAGA allows employees who have been adversely affected by at least one employer violation of a California Labor Code provision to file a claim on their own behalf, that of the State of California, and on behalf of other employees.
Similar to PAGA, a qui tam action is one in which a private party, a relator, can file a lawsuit against a violator of state law on behalf of the government, even though the government is the real plaintiff. If successful, the relator can receive part of any awarded money damages.
The interpretation of PAGA prior to Magadia v. Wal-Mart was expansive with respect to standing for plaintiffs, making it difficult to defend against PAGA claims. While PAGA requires a plaintiff to have been harmed by a violation of law, a qui tam action does not require harm. A set of cases in California seemed to conflate standing in PAGA actions and standing in qui tam actions:
- 2014: In Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), the California Supreme Court labeled a PAGA action “a type of qui tam action[.]”
- 2017: In Williams v. Superior Ct., 3 Cal. 5th 531, 538 (2017), the same idea was reiterated when the California Supreme Court indicated that a PAGA case was “essentially a qui tam action.”
- 2018: In Huff v. Securitas Security Services, USA, Inc., 23 Cal. App. 5th 745 (2018), the Court of Appeal, Fifth Appellate District, determined that a PAGA plaintiff need only have suffered one alleged violation of the Labor Code to be able to seek penalties for violations affecting other employees.
With the combination of these cases, it became difficult for an employer’s attorney to defend against PAGA claims because the cases left the impression that named plaintiffs did not have to allege that they suffered from the purported conduct themselves.
Magadia v. Wal-Mart Effect on Standing
In Magadia, the Ninth Circuit decided a PAGA action was not a qui tam suit with regard to standing under Article III even though California courts had been applying qui tam standing provisions to PAGA actions.
The case turned on two issues upon which Walmart was found at fault:
- Itemized Overtime Rates: The district court determined Magadia had standing to file a PAGA suit for Walmart’s alleged violations of California Labor Code Section 226 by not itemizing an “overtime rate” within a standard itemized wage statement.
- Premiums for Meal Periods: In California, employees are owed “premium pay” under California Labor Code Section 226.7 when they miss a meal break or a rest break. The district court awarded civil penalties of $70,000 because, even though Magadia was not impacted by the alleged violations, non-party employees were.
Magadia suffered no violation from the meal period premium, yet the district court assessed civil penalties as if Magadia had made a qui tam on that count. The Ninth Circuit disagreed, finding that the overtime claim and meal period claim were separate and that standing in one did not equate to standing in the other.
The Continued Impact of the Ninth Circuit’s Decision in Magadia v. Wal-Mart
Aside from the PAGA standing issue addressed in Magadia, the federal court decision reflects another win for California employers. In the lower court case, Magadia prevailed on the allegation that Walmart had failed to itemize an overtime rate within a standard itemized wage statement, as required by law. The court awarded substantial damages. The Ninth Circuit appeals court overturned the lower court, finding that Section 226’s itemization requirements did “not apply to an artificial after-the-fact rate.” This finding of the federal court has now been recognized in state court.
Meza v. Pacific Telephone Co., 79 Cal. App. 5th 1118 (2022)
A state court case, Meza applied the finding of the Magadia court with respect to Magadia’s finding on the itemization requirements, holding that employers are not obligated to include in wage statements hourly rates for prior pay periods. The state appeals court stated that “[T]hough we are not bound by the Ninth Circuit’s views on this issue (Barrett v. Rosenthal (2006) 40 Cal.4th 33, 58 [51 Cal.Rptr.3d 55, 146 P.3d 510]), we agree with its analysis.”
Together, these cases will relieve employers of one of the burdensome requirements of Section 226 with respect to wage statements and stave off PAGA suits heretofore brought by employees who have not been harmed by a particular action of the employer.
Stay In-the-Know to Defend against PAGA Claims
California can present quite a maze for an employer to wade through in trying to figure out the precise amount to pay an employee, how to avoid paying penalties for wage statement errors and how to avoid California PAGA claims. Rest and meal breaks can be particularly problematic as can knowing how, when and where to calculate and itemize overtime pay. The smallest of mistakes can potentially result in millions of dollars in civil penalties — a death knell for many employers.
Knowing when an employee can bring a PAGA action can be just as important as defending against PAGA claims. An experienced employer defense attorney understands that an attempt by an employee to bring a PAGA claim is meritless and can seek early resolution of the claims through a motion to dismiss, for partial summary judgment or summary adjudication. When successful, these motions lessen the chance of costs incurred by later litigation.
The employer defense team at the Law Offices of Susan A. Rodriguez, APC keeps up-to-date on changes in labor law matters, such as differentiating between meritless claims and those that could mean liability. Our offices focus on vigilantly following the course of case law to always know the current status and give employers the benefit of that current knowledge to defend against PAGA claims. Prevent wasted time on meritless claims and any misunderstanding of a pending PAGA claim. For a consultation with a PAGA defense attorney, call Susan at (213) 943-1323 or complete her online contact form.
Posted by Susan A. Rodriguez, Esq.
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