Two Key Points in Court of Appeal’s Decision In Lopez v. Friant & Associates, LLC
In a recent decision handed down by the First District Court of Appeal, civil penalties under the Private Attorneys General Act of 2004 (“PAGA”) as set forth in the Labor Code, can be awarded for incomplete or inaccurate wage statements even if the employee was not injured by the omission or inaccuracy and even if the omission or inaccuracy was not the result of knowing or intentional conduct by the employer. However, the trial court has discretion under PAGA to decline to award PAGA penalties or reduce the amount of those penalties based on evidence that the omission or inaccuracy was inadvertent.
In 2015, Eduardo Lopez filed a single-count complaint under the California Private Attorneys General Act (PAGA) in California state court asserting that his employer, Friant & Associates, LLC failed to include the last four digits of its employees’ Social Security numbers or employee identification numbers on itemized wage statements, in violation of California Labor Code Section 226(a)(7).
Friant moved for summary judgment, arguing that the plaintiff failed to show that he suffered any injury resulting from a knowing and intentional violation of Section 226, as required by Section 226(e). The trial court granted summary judgment, concluding the employee must show more than a mere violation of Labor Code §226 and he also must demonstrate that he was injured as a result of a “knowing and intentional” violation. Because the employee offered no evidence to contradict the statement of the employer that it was not aware the last four digits of employees’ Social Security numbers were not included on employees’ pay stubs, the court ruled in favor of the employer.
However, the appellate panel reversed, concluding that because a PAGA representative action is not an action for statutory damages, the employee did not have to demonstrate injury as a result of a knowing and intentional violation of Labor Code §226 to obtain the civil penalties under PAGA. However, PAGA does allow the trial judge to decline to award PAGA penalties or reduce the amount of a PAGA award, based on the evidence that the error or omission in the wage statement was inadvertent.
“Because section 226(e)(1) sets forth the elements of a private cause of action for damages and statutory penalties, its requirement that a plaintiff demonstrate ‘injury’ resulting from a ‘knowing and intentional’ violation of section 226(a) is not applicable to a PAGA claim for recovery of civil penalties,” the court wrote. The panel further explained that its interpretation was bolstered by “the fact PAGA expressly recognizes a claim for violation of section 226(a), but does not mention 226(e),” the court said. “Thus, by its plain language, PAGA allows a claim for violation of section 226(a) without any reference to subdivision (e).”
California rolled out a unique approach to enforcing the State’s Labor Code when it enacted the Private Attorney General Act of 2004 (PAGA) codified in California Labor Code § 2698, et seq. PAGA allows a private citizen to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency (LWDA) provided the formal notice and waiting procedures of the law are followed.
More specifically, PAGA allows current and former employees to file lawsuits to recover civil penalties that would otherwise only be recoverable by the government. It is used for wage-and-hour and safety violations, and the lawsuits are filed on behalf of the named employee and other “aggrieved” current and former employees.
While similar to a “class-action lawsuit”, a PAGA claim is considered a “representative lawsuit,” and it can be pursued without meeting all the requirements of class certification. That means it is easier for the employee’s attorney to pursue, but still has the consequences of aggregating multiple employees.
The concept behind the law is that the state’s labor agency does not have the resources to handle the penalty claims. The statute authorizes private attorneys to step into the state’s shoes to pursue those cases and entitles them to recover reasonable attorney’s fees if the employee prevails.
Since its enactment, PAGA has been the source of much confusion and the legislature continues to review bills to modify PAGA. None of these bills deal with the differing interpretations about whether and how PAGA penalties apply to certain types of violations—particularly claims brought under section 226(a).
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While questions remain about PAGA, and amendments continue to be filed, the there remains numerous benefits as a result of its passing more than a decade ago. Our firm continues to prosecute these claims as the best way to create change in corporate America. To further discuss PAGA, or a potential claim on your behalf, feel free to contact leading California employment lawyers at Kingsley & Kingsley. Call toll-free at (888) 500-8469 or click here to contact us via email.
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