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May 05, 2022

California Court of Appeals are Split on Whether Employers Can Dismiss a PAGA Claim Based on Manageability

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In Estrada v. Royalty Carpet Mills, Inc., 76 Cal. App. 5th 685 (2022), the California Court of Appeal, in relevant part, reversed a trial court's order decertifying a subclass and dismissing related Private Attorneys General Act (PAGA) claims as unmanageable. In doing so, the court held "a court cannot strike a PAGA claim based on manageability."

Facts

Plaintiffs, employees at carpet manufacturing facilities, brought an action against their employer alleging representative claims under the PAGA and class claims for purported meal and rest period violations, derivative claims for wage statement and waiting time penalties and violation of the Unfair Competition Law, and a claim for declaratory relief. The trial court initially certified two classes (i.e., one class of workers in Porterville, California and a second class of workers in Dyer and Derian, California) with multiple subclasses. After trial, the court, in relevant part, decertified the Dyer/Derian meal period subclass because there were too many individualized issues to support class treatment and then dismissed the portion of the PAGA claim based on meal period violations at Dyer/Derian "because the individualized issues made it unmanageable."

Court Opinion

The Court of Appeal for the Fourth District reversed, in relevant part, finding that the trial court improperly dismissed the PAGA claim as unmanageable. In doing so, the court expressly stated that the purpose of publishing its opinion was to discuss concerns regarding so-called "unmanageable PAGA claims."

The Estrada court explained that based on its reading of pertinent California Supreme Court authority, it was compelled to "respectfully disagree" with a decision issued by the Court of Appeal for the Second District, Wesson v. Staples the Office Superstore, LLC, 68 Cal. App. 5th 746 (2021), which found that "courts have inherent authority to ensure that PAGA claims can be fairly and efficiently tried and, if necessary, may strike a claim that cannot be rendered manageable."

The Estrada court held dismissal of PAGA claims based on manageability is not appropriate, and courts should instead, where appropriate and within reason, limit the amount of evidence PAGA plaintiffs may introduce at trial to prove alleged violations suffered by other aggrieved employees. If plaintiffs are then unable to show "widespread violations in an efficient and reasonable manner," the appropriate remedy, according to the Estrada court, would be to reduce the penalty amount.

The Court of Appeal in Estrada reasoned that PAGA claims are not conventional suits or class actions, but rather administrative law enforcements actions intended to augment the limited capability of the Labor Workforce Development Agency (LWDA). Accordingly, manageability (i.e., a class action requirement) should not be imposed on PAGA claims, especially when the LWDA is not subject to a manageability requirement when it investigates Labor Code violations and assesses fines internally.

Practical Implications

The decision in Estrada creates a split of authority between two California appellate districts. The conflict will remain until the California Supreme Court steps in and resolves the differing views.

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