What Are PAGA Penalties?
California’s Private Attorney General Act of 2004-or PAGA-gives private citizens the ability to pursue penalties against employers for violations of the California Labor Code. In cases in which plaintiffs successfully bring PAGA claims, 75% of these penalties go to the state entities (specifically, to the California Labor and Workforce Development Agency or LWDA). Of course, that leaves open the question of who receives the rest. Since PAGA was passed in 2004, most attorneys litigating PAGA cases on a class-wide or representative basis have assumed that the remaining penalties are to be shared among all of the affected class members. Certain cases have suggested as much. See, e.g., Schiller v. David’s Bridal, Inc., 2010 WL 2793650 (E.D. Cal. 2010); Lopez v. Ace Cash Express, Inc., 2012 WL 1655720 (C.D. Cal. 2012); Ivey v. Apogen Technologies, Inc., 2011 WL 3515936 (S.D. Cal. 2011).
In Cunningham v. Leslie’s Poolmart, Inc., however, Hon. Christina Snyder of the United States District Court for the Central District of California noted that representative PAGA actions bear only “a superficial resemblance” to class actions and “are better characterized as a type [of] ‘qui tam’ action.” 2013 WL 3233211, at *6-7 (C.D. Cal. June 25, 2013). In Cunningham, Judge Snyder described a PAGA claim as essentially a “law enforcement action designed to protect the public and penalize the employer for past illegal conduct” rather than an action “to collect damages on behalf of other employees or provide restitution to victims of Labor Code violations.” Id. at *6. Judge Snyder noted further that the only parties bound by PAGA litigation are the employer, the private plaintiff himself or herself, and the LWDA “because a private plaintiff bringing a PAGA suit is acting as a private attorney general on behalf of the State of California, not as a representative of other employees.” Id.
Who Is Entitled To Receive PAGA Penalties?
Because the Cunningham court viewed the private plaintiff bringing a PAGA case more like an attorney general or a qui tam relator than a traditional class representative, the court concluded that “the best interpretation of PAGA is that the penalties not distributed to the Labor Workforce Development Agency are distributed to the individual employee who brought the action” rather than distributed broadly to a class of employees. Id. at *6, n.1. In the court’s view, this is the case both because non-party employees need not be given notice of PAGA representative actions and because PAGA’s purpose would be better served by creating a substantial financial incentive for individual employees to bring actions enforcing the California Labor Code. Id.
Can PAGA Actions Proceed As Class Actions?
If PAGA actions were required to proceed as class actions, this incentive would be greatly diminished, as all class members would then presumably be required to share any recovered penalties, thereby reducing the financial incentive to bring a PAGA action. The court pointed out further that PAGA “contains no provisions for distributing any portion of the recovery to non-party employees, even though PAGA contains detailed procedures setting out how a representative action is litigated.” Id.
It remains to be seen whether Judge Snyder’s view regarding who receives the non-LWDA portion of the penalties will be followed by other courts (as of this writing, no reported case has cited this portion of Cunningham, though Cunningham itself includes references to courts in at least two cases that “seem to assume that the twenty-five percent recovery goes to the individual plaintiff.” Id. (citingAdoma v. University of Phoenix, Inc., 2010 WL 6651141 at *10 (E.D. Cal. 2012); Amaral v. Cintas Corp., No. 2, 163 Cal.App.4th 1157, 1195 (2008)). Given the apparent purpose of PAGA – to provide an incentive to private citizens to enforce provisions of the California Labor Code – Judge Snyder’s analogy to qui tam actions merits further consideration.