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California Appeals Court Reverses Summary Judgment in Favor of Defendant Employer on PAGA Cause of Action

Posted in California Courts, Employment Litigation, Litigation Trends

In a recent decision, Lopez v. Friant., 2017 WL 2451126, the California First District Court of Appeal provided guidance as to the meaning of the Private Attorneys General Act, or PAGA.  The Lopez ruling reversed an Alameda County trial court’s ruling, which had granted summary judgment in favor of defendant-employer Friant & Associates on the grounds that plaintiff had failed to establish a knowing or intentional failure to include required information on itemized wage statements. The Court found that when a cause of action is brought under PAGA for civil penalties based on an underlying Labor Code violation requiring “injury” and “intent,” the plaintiff is not required to make a showing of those requirements. Rather, the Court found that a plaintiff may prevail merely by showing that the employer failed to make the required disclosure. By raising this disclosure omission under PAGA, rather than through a cause of action under the underlying statute, the plaintiff effectively circumvented the requirements of proving “injury” and a “knowing and intentional” violation. The Court’s opinion includes a discussion of the plain language of each statute, as well as their legislative histories. The decision exemplifies California courts’ willingness to allow wage and hour violation claims to proceed past the summary judgment stage, which could make it difficult for employers to dispose of cases early through dispositive motions.

 

In Lopez, plaintiff Eduardo Lopez  brought a lawsuit against employer Friant & Associates raising a single cause of action: a PAGA cause of action based on an alleged underlying Labor Code violation under Section 226(a)(7), which requires an employer to provide itemized wage statements that include the last four digits of an employee’s social security number. Section 226 independently authorizes a civil cause of action for aggrieved employees, and Section 226(e)(1) stipulates that the prerequisites for prevailing under this section include a showing of injury arising from a “knowing and intentional” violation of the Section.

 

At the summary judgment stage, employer Friant argued that plaintiff had failed to present a triable issue of material fact as to the requirements of injury and intent. The Alameda County trial court agreed and granted summary judgment in favor of Friant. On appeal, however, the First District Court of Appeal found that, while the civil cause of action authorized under Section 226 requires a showing of injury and knowing and intentional violation, the PAGA cause of action is separate and independent, and does not require a plaintiff to make this showing. The parties stipulated during litigation that Friant had issued 5,776 itemized wage statements to the plaintiff and other employees that failed to include such information. Accordingly, the Court reversed the grant of summary judgment because a triable issue of material fact existed.

 

The Court’s most significant discussion focuses on how to interpret the law when a plaintiff raises a PAGA-authorized claim based on an underlying Labor Code violation, such as 226, which authorizes its own cause of action with attendant elements. In reaching the conclusion that PAGA does not require the same injury and intent elements as Section 226, the Court addressed the plain language of the statutes and the legislative histories of Section 226 and PAGA.

 

In discussing the plain language of both Section 226 and PAGA, the Court noted that PAGA is a type of qui tam statute that allows aggrieved employees to recover civil penalties on behalf of the state, rather than simply for themselves. Thus, while Section 226 authorizes private statutory damages actions, PAGA “deputizes citizens as private attorneys general” to enforce the Labor Code and collect penalties that will be used for the benefit of the general public. The Court pointed to California courts’ history of distinguishing between civil penalties authorized under PAGA and statutory penalties available to employees through the Labor Code. In this case, the Court noted that Section 226(e) authorized “actual damages” or “penalties” rather than a “civil penalty,” whereas PAGA authorizes “civil penalties.” Accordingly, the Court found that the requirements of Section 226(e) to show injury as a result of a knowing and intentional violation do not apply to PAGA causes of action.

 

The Court also addressed the legislative histories that led to the enactment of both Section 226 and PAGA. The Court specifically discussed the fact that the language added to Section 226 requiring injury and a knowing and intentional violation was added long before the passage of PAGA. The Court noted that Section 226’s legislative history pointed to a desire to remedy harm caused to an individual employee from an employer’s failure to comply with the Labor Code. Indeed, a few years later the Legislature added a specific provision authorizing a civil penalty available to individuals. Accordingly, the Court found that Section 226 authorizes a separate and distinct cause of action from that authorized by PAGA.

 

The Court cited further support from the fact that a PAGA plaintiff must “comply with administrative procedures” outlined in PAGA, including allowing an employer the right to cure violations. A violation of Section 226(a) is one such non-curable violation. The Court found particularly compelling the fact that PAGA cites specifically to subsection 226(a) rather than to Section 226 generally.

 

The Court further pointed out that its interpretation is consistent with many federal court decisions that have determined Section 226(e) requirements do not apply to PAGA claims based on Section 226(a) violations. The Court also distinguished case law cited by employer Friant, explaining that the PAGA claim in question is not a derivative action, but rather an independent cause of action.

 

The Lopez decision underscores California courts’ broad interpretation of wage and hour statutes and the various means of enforcing them.