CDA Blog

The California Supreme Court Rules in Favor of Employees in the Latest PAGA Saga

By David Wall, Chief Legal Officer & Ali Ammar, Chief Investigator

On January 18, 2024, the California Supreme Court (the “Court”) issued its long-awaited decision in Estrada v. Royalty Carpet Mills, Inc. The case involves a disagreement and split of authority in the California Courts of Appeal regarding the inherent authority of trial courts to strike claims under the Labor Code Private Attorneys General Act of 2004 (“PAGA”) on the grounds of manageability.

PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties for themselves, other employees, and the State of California for Labor Code violations. The purpose of PAGA was to increase enforcement of the Labor Code by “deputizing” citizens to act as private attorneys general and allowing them to pursue civil penalties on behalf of the state for Labor Code violations. This private enforcement mechanism was meant to help address the reality that labor enforcement agencies could not keep up with the growth of the labor market and the number of Labor Code violations occurring in workplaces.

At issue in Royalty Carpet Mills, Inc., was a group of plaintiffs seeking PAGA penalties for various alleged violations of the Labor Code concerning provisions related to meal periods. The trial court had certified subclasses for former nonexempt hourly workers related to meal periods but later decertified these on the grounds of individualized issues and dismissed the PAGA claim as unmanageable. The Court of Appeals reversed this decision, finding that the trial court abused its discretion by decertifying the subclasses and dismissing the PAGA claims on manageability grounds.

However, in a unanimous decision, the Court reversed this ruling, finding that trial courts do not possess inherent authority to strike PAGA claims. The Court’s holding emphasizes that such authority is limited and not generally applicable to dismiss claims. Instead, the authority to strike a claim is tightly circumscribed and generally confined to situations including a failure to prosecute or sham claims.

The broadened scope of PAGA claims allows employment attorneys to pursue their cases more aggressively, with the scales tipped even more in their favor. Attorneys often rely on the California Detective Agency to provide prelitigation research to ensure a case is worth pursuing, identifying all potential individual principals that may be defendants, and researching assets to ensure a defendant’s offer is fair and in line with the company’s assets. Including additional defendants in your complaint can lead to quicker and more cost-effective settlements for aggrieved employees.

The Court’s analysis continues to the manageability requirement, noting that such a requirement in PAGA cases would contradict California law and the structure and purpose of PAGA. The Court distinguishes between the concepts of manageability in class actions and PAGA claims, arguing that class action manageability requirements, focused on the predominance of common issues and the superiority of class actions as a method of adjudication, do not apply to PAGA claims. The Court also examines the jurisprudential basis and statutory provisions related to PAGA, concluding that manageability is not a valid ground for striking a PAGA claim.

Similarly, the Court refutes the contention that trial courts possess broad inherent authority to strike claims for judicial economy purposes, emphasizing the narrow scope of such inherent authority. As support for its position, the Court examines distinctions in the trial court’s power in the context of both class actions and PAGA claims. It found that manageability, as a factor in class certification, does not establish a similar requirement for PAGA claims. Furthermore, the legislative intent behind PAGA emphasizes its purpose to maximize the enforcement of labor laws, which is inconsistent with imposing a manageability requirement.

In conclusion, the Court rejects the idea of importing class action manageability requirements into PAGA claims. It asserts that such an action would be inappropriate due to the structural differences of the two legal mechanisms, differing jurisprudential histories, and specific statutory frameworks. Accordingly,  the Court reaffirms that manageability is not a valid ground for dismissing or striking PAGA claims, thereby upholding the Court of Appeal’s judgment.

The investigators at California Detective Agency have worked on some of the largest verdicts in California, including a $175 million business dispute, labor law cases up to $29 million, and wrongful death cases as high as $36 million. If you need assistance with investigating a potential or pending labor law case, or for help with the enforcement of a judgment, contact California Detective Agency for some of the best expertise available in the legal industry!

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