New opinion would drastically broaden PAGA litigation – however will it final? | CDF Labor Law LLP
Last week, the California Appeals Court, Fourth Appeal District, dropped a bombshell on employers by ruling that an employee is entitled to prosecute PAGA sentences even if she claims she has suffered a labor law violation outside of the applicable one-year statute of limitations to have . The holding company, if it passed, would likely increase the volume of PAGA lawsuits and make defending them even more difficult. It would also undermine PAGA’s longstanding jurisdiction.
The Johnson decision has been certified for publication, making it binding on all California lawsuits without resolution, trial, review, and / or detection. Employers should monitor developments in this case and consider requesting publication of the decision as described below.
The Decision: Johnson Vs Maxim Healthcare Services, Inc.
Maxim Healthcare Services, Inc. (“Maxim”) required employees, including Plaintiff Gina Johnson, to sign a non-disclosure, solicitation, and non-compete agreement (“Agreement”). Such agreements are generally invalid under California law. (Cal. Bus. & Prof. Code § 16600 (“Any contract that prevents someone from exercising a lawful occupation, trade or business of any kind is void” unless it falls under an exception under sections 16601, 16602 or 16602.5).
Johnson signed the agreement on September 7, 2016. More than three years later, while Johnson was still with Maxim, he filed a representative lawsuit under PAGA with no individual claims. Johnson alleged that Maxim violated Section 432.5 of the Labor Code by requiring its employees to sign the agreement, claiming it was an “ongoing violation” until Maxim rescinded the agreement. (Section 432.5 states: “No employer … shall require an employee … to agree in writing to a term or condition that that employer knows is prohibited by law”).
The court upheld Maxim’s objection and dismissed the PAGA lawsuit because an individual lawsuit for violation of Section 432.5 has a three-year statute of limitations, and it filed a lawsuit outside of that time limit. Because Johnson was not entitled to bring an individual lawsuit, the court found that Johnson was unable to pursue a PAGA lawsuit in a representative capacity.
The Court of Appeal overturned the ruling which stated that, according to the 2020 California Supreme Court ruling in the Kim v. Reins “an employee whose individual claim is statute-barred” may still pursue a representative claim under PAGA. ”In the Kim case, the Supreme Court ruled that the settlement of individual claims of an employee does not prejudice a worker’s eligibility to maintain a PAGA claim. The Johnson Court of Appeals found that “Kim’s rule is that an aggrieved worker is entitled to pursue a PAGA claim regardless of whether that worker maintains a separate Labor Code claim.”
The appeals court therefore found it irrelevant that Johnson’s individual claim was statute barred and allowed her to maintain her PAGA claim. In particular, the appeals court did not rely on or refer to the fact that Johnson was a current employee or that she alleged an “ongoing” breach of the Agreement. Amazingly, the fact that Johnson claimed to have committed a breach years ago was enough for the appeals court to find that she was entitled to uphold a PAGA claim.
Unaddressed issues relating to a timely PAGA representative claim
The Johnson Court of Appeal ruling followed the precedent of the Kim Supreme Court and found that Johnson’s inability to bring an individual lawsuit did not prejudice their standing in standing a PAGA lawsuit. The court’s analysis shouldn’t have stopped there, but it did. As a result, the Johnson decision ignores two fundamental aspects of PAGA litigation and creates a great deal of uncertainty about an employee’s eligibility to make a PAGA claim.
First, the PAGA statute requires that injured employees bring legal action on behalf of themselves and other employees to seek civil sanctions. Civil law sanctions are imposed on each employee for each pay period in which a violation of the Labor Code has been committed against him. The California Supreme Court has stated that PAGA plaintiffs are “bringing civil actions in person and on behalf of other current or former employees to seek civil sanctions.” (Arias v. Superior Ct .; Lab. Code § 2699 (a).) The “injured employee … is a member of the represented group”. (Arias.) Accordingly, the PAGA plaintiff’s action must seek at least a civil sanction for a violation committed by him or her and a civil sanction for a violation by another employee.
Second, civil sanctions imposed by PAGA are subject to a one-year statute of limitations. Aggrieved employees can only assert civil law sanctions for violations that the employer has committed within the limitation period. You cannot enforce civil sanctions for violations before the statute of limitations expires. Taken together, the PAGA plaintiff and a represented employee must have experienced a violation within the one-year limitation period.
Although Maxim put forward these arguments in his reply, the appeals court ignored them in its decision. As a result, Johnson was allowed to maintain a purely representative PAGA claim on behalf of others, in violation of longstanding PAGA jurisprudence.
Will Johnson stand and what to do about it?
The new branch of PAGA jurisdiction spawned by Johnson can – and certainly should not – survive. California courts agree that PAGA does not allow employees to bring claims in their own name and not on behalf of others. The converse must also be true; that PAGA does not allow purely representative claims that are asserted exclusively on behalf of others.
Without clarification, re-examination or repeal, the Johnson decision would negate the basic requirement that a PAGA plaintiff must be a member of the group represented. It may be that Johnson’s involvement should be limited to its facts – specifically the fact that Johnson was a current employee who claims an ongoing injury theory. However, the Court did not specifically refer to these factors in its ruling, which gives rise to great concern and confusion about the legal status under PAGA.
It remains to be seen whether Maxim will go for a trial or review. Employers should monitor developments in the case and consider asking the Supreme Court to overturn the Johnson decision under the California Rules of Court, Rule 8.1125. In addition, employers must continue to assess compliance with the Labor Code and monitor legal developments to prevent and raise awareness of potential violations.