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State Supreme Court rules on PAGA-only actions

California is often an outlier in favor of the employee when it comes to employment law and employee rights. One example is the Private Attorneys General Act (PAGA), a law from 2004 that enables a plaintiff of a PAGA-only claim to sue their employer on the state’s behalf to get unpaid wages. The unions backed the idea because it was a way to hold employers more accountable to labor codes. As recently as last year, this meant that employees netted $88 million from California businesses, including $10.7 million to 99,000 current and former Walmart cashiers.

PAGA enabled aggrieved employees to bring a representative action on behalf of all company employees and then keep 25% for themselves as well as cover the cost of attorney’s fees. The rest of the settlement goes to the state. The notable exception is that all “unpaid” wages would go directly to the employees. Moreover, previous PAGA claims could not be waived, nor could the employees be compelled to arbitrate their claims.

Supreme Court makes changes

The Supreme Court gave employer when it ruled to limit the scope of PAGA. The Labor Commissioner can recover unpaid wages using PAGA while avoiding arbitration or class action. However, it concluded that unpaid wages do not mean a civil penalty to be collected by the plaintiff using PAGA.

According to this new ruling, only the Labor Commissioner can issue a citation for a civil penalty and unpaid wages. So rather than an action, the claims regarding unpaid wages, overtime, meals, and rest should follow arbitration clauses if they are in contracts and handbooks.

This is good news for businesses — rather than an expensive and possibly lengthy court fight involving unwieldy actions, and the employer will more often now only need to face arbitration

These laws are complex

Those with questions regarding these changes to PAGA should speak with an experienced employment law attorney. These legal professionals can revise contracts and handbooks to better protect employers from unnecessary litigation through PAGA or other applicable laws.