The Private Attorney General Act (PAGA) is crazy making for California employers.
In plain English, PAGA allows a Court to award a penalty for each pay period that includes a wage-and-hour violation. It does not include the damages for the underlying violation, just the discretionary penalty, which starts at $100 per employee per pay period, and increases to $200, and even $250 (or in extreme cases of knowing violations, $1000).
How does this craziness work you ask? Let’s say an employee took a late meal break, but the system didn’t generate a meal premium (or the manager incorrectly removed it). That’s one PAGA penalty. And perhaps the employee was also too busy that day to take a duty free rest break, but no rest premium was paid. That’s another PAGA penalty. And perhaps the employer still rounds time, so that a few minutes was inadvertently shaved off that shift, now we are at 3 PAGA penalties. Oh, and, the employee was paid a shift premium for working second shift, but it was not included in her overtime rate for that week. Now we are at PAGA penalty #4. That’s referred to as stacking.
Assume you have 100 employees and pay weekly; that is a possible 5200 pay periods per year where PAGA penalties can be incurred.
And to top it off, opposing counsel gets attorneys’ fees, typically at least one third of the total amount recovered. Skeptics (or realists, depending on your perspective) will say that attorneys’ fees drive these cases. Any employer who has been sued under PAGA will likely agree.
So can these cases be defended, and if so how?
One way to defend is to have great policies and superb compliance in all areas of wage-and-hour law. If the roulette wheel stops at your business, you can try to explain to opposing counsel why there is nothing to recover (or not enough to warrant their time and energy to pursue). You argue that PAGA penalties are discretionary, and no judge will award stacked penalties, or even any penalties, for a few isolated glitches. Maybe you hit a home run and convince them to drop it. Or a solid double by agreeing to mediate early and to settle expeditiously for less than the cost to litigate.
Another way is to litigate the case and raise the defense of manageability. That defense was recently bolstered by a California Court of Appeal decision (Wesson v. Staples) which affirmed a court’s ability to dismiss a PAGA claim on a motion to strike when Plaintiff’s counsel is unable to provide a reasonable trial plan. The trial plan isn’t reasonable if there is no issue of common proof, and each employee’s experiences have to be evaluated on an individualized basis. Notably, this decision came after class certification was denied. That means a lot of time in litigation, and lots of discovery. In short, the manageability defense only works after sufficient discovery for Plaintiff to set forth a trial plan. In reality, than means a year (or likely more) of litigation.
Applied to facts as set forth above, the manageability defense could go something like this:
- The company had the right policies, and did pay meal premium, but individual managers may have improperly removed it because they didn’t understand the waivers, so each removed premium needs to be analyzed separately.
- Some managers simply forgot to code a missed rest premium, thereby requiring an analysis of the facts surrounding each premium not provided.
- Rounding benefits employees as much as the employer, and is neutral overall, so the issue would have to be reviewed as to each employee to determine a gain or loss.
- Shift premium is sometimes included in the overtime rate, and sometimes not, so again, no general rule to rely on.
Not quite a slam dunk defense, but something helpful for employers who want to fight back and litigate their PAGA cases.