On August 31, 2023, the California Court of Appeals issued two decisions that will create more challenges for California employers defending against lawsuits brought under California’s Private Attorneys General Act (PAGA). One decision limits the preclusive effect of PAGA settlements, while the other decision strengthens a PAGA plaintiff’s ability to intervene in, and object to, overlapping PAGA settlements. These decisions make it more important for California employers to implement a robust wage-hour compliance program.
PAGA authorizes “aggrieved employees” to sue their employers, on behalf of the State of California, for alleged violations of the California Labor Code (generally, wage-hour claims). Before filing a PAGA lawsuit, an employee must give notice of the alleged Labor Code violations to the California Labor & Workforce Development Agency (LWDA). If an employee prevails on his or her claims, he or she can recover civil penalties for each pay period in which a Labor Code violation occurred. 75% of a PAGA judgment goes to the LWDA and 25% is awarded to the group of aggrieved employees. However, the vast majority of PAGA lawsuits settle.
Similar to class actions, PAGA settlements require court approval. Once approved, the settlement generally bars lawsuits by other employees over the same, or similar, PAGA claims. Thus, PAGA settlements can effectively preclude other PAGA lawsuits. However, two recent appellate decisions dimmed the preclusive...
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