CALIFORNIA – California employers are encountering fresh challenges in the wake of the recent California Supreme Court decision regarding Private Attorneys General Act (PAGA) lawsuits.
The Private Attorneys General Act (PAGA), established in 2004, allows employees to file lawsuits on behalf of the California Labor and Workforce Development Agency to recover civil penalties for violations of the Labor Code. These lawsuits affect both current and former employees, providing an easier path to monetary compensation. However, the recent California Supreme Court decision raises questions about how employers will navigate lawsuits deemed “unmanageable” under PAGA.
Before the pivotal decision in the case of Estrada vs. Royalty Carpet Mills, Inc., employers sought ways to limit, reject, or dismiss unmanageable PAGA lawsuits. The Second District Court of Appeals, Division Four, in Wesson vs. Staples, had granted trial courts inherent authority to manage the manageability of these lawsuits, offering a small victory for employers.
However, the Fourth District Court of Appeals, Division Three, in Estrada v. Royalty Carpet Mills, Inc., took a different stance by stating that courts could not dismiss a PAGA lawsuit on manageability grounds. Despite acknowledging the existence of unmanageable lawsuits, they argued that doing so would interfere with the purpose of PAGA as an enforcement mechanism.
In its January 18 decision, the California Supreme Court stripped courts of their authority to reject or dismiss PAGA lawsuits due to lack of manageability. While acknowledging that courts lack this inherent authority, the Court left open various defense strategies for employer-defendants.
The Court emphasized the defendant’s right to due process. It established that employers have the right to present affirmative defenses, and evidence in support of their arguments, challenge the plaintiff’s demonstration, and present evidence to reduce claimed damages. However, the Court did not address when and under what circumstances due process rights would support the rejection of a PAGA lawsuit.
