Risks To Companies With Expanding PAGA Claims

Under California law, employees who become aware of a violation of law at the workplace can bring a claim as a ‘Private Attorney General’ against the company. In California’s Labor Code, the Private Attorneys General Act (“PAGA”) allows employees to bring a civil action for penalties for themselves, for other workers in similar situations, and/or for the State of California. The procedure for filing a PAGA claim is set out in the Labor Code.

Representative PAGA Claim Alone?

A recent California case appears to have substantially expanded the class of potential PAGA claimants, indicating that companies and courts might feel the impact of many more cases. In Johnson v. Maxim Healthcare Services, Inc., the Fourth District Court of Appeal held that an employee had standing to pursue penalties under PAGA even though her claim was based on events far outside the one-year statute of limitations.

The employee who made the claim, Gina Johnson, had signed a non-compete, non-disclosure agreement, which was in fact illegal under California law, but she made no claim for this Labor Code violation until more than three years after she’d signed the offending agreement. Johnson’s claim was a representative action, with no personal claim. She claimed that Maxim broke the law in making employees sign the document, and then engaged in a “continuing violation” of the law until it withdrew the disputed agreement.

Trial Court Issues Decision To Dismiss

The trial judge dismissed the PAGA claim because the plaintiff lacked an individual claim under the law in the pleadings. Johnson made her claim more than three years after signing the agreement, and the Labor Code section that she based her claim on had a three-year statute of limitations. Finding that she could not bring her own individual action, the court held that she could not, therefore, maintain a PAGA representative claim.

Bound By Precedent To Expand PAGA Claims?

On appeal, the Fourth District relied on the recent California Supreme Court case of Kim v. Reins (2020) to hold that a time-barred employee is still allowed to pursue a representative PAGA claim. Based on the logic of Kim, the Court of Appeal held that an “aggrieved employee has standing to pursue a PAGA claim, irrespective of whether that employee maintains a separate Labor Code claim.”

California Attorneys Who Represent Employers

To learn more about the risks to companies with PAGA claims, you should talk with an employment attorney. Mohajerian Law Corporation has more than two decades of experience supporting California employers in all types of labor and employment matters including regulatory compliance, execution of legal contracts and policies, and litigation. Our experienced employer-side attorneys are here for you and will help ensure that your business interests and rights are well protected. Contact Mohajerian Law Corporation by calling (310) 556-3800 or by contacting us online for a consultation.