California Supreme Court Declines To Rein In PAGA Plaintiff’s Standing

Seyfarth Synopsis: The California Supreme Court has held that, under the Private Attorneys General Act (“PAGA”), an employee does not lose the ability to pursue representative claims as an “aggrieved employee” by virtue of settling and dismissing individual claims against the employer. Kim v. Reins International California, Inc.

The Facts

Justin Kim sued his employer, a restaurant management company called Reins International, for misclassifying him as exempt from California’s overtime laws. Kim filed his lawsuit as a class action on behalf of training managers, seeking unpaid wages and civil penalties. Kim also included a representative claim under PAGA. Reins International successfully moved to compel enforcement of its arbitration agreement with Kim, which put the PAGA claim on hold until the parties arbitrated Kim’s individual claims. Once in arbitration, Kim agreed to settle his individual claims, while carving out from the settlement his pending PAGA claim.

Reins International then moved for summary judgment, arguing Kim’s rights had been “completely redressed” by settlement, and that he was no longer an “aggrieved employee” eligible to sue under PAGA. Both the trial court and the Court of Appeal agreed with Reins International.

But then the California Supreme Court took the case to decide whether a PAGA plaintiff loses standing as an aggrieved employee if he dismisses his individual claims for Labor Code violations.

The California Supreme Court’s Decision

The high court focused on what is required to have standing to sue under PAGA. Everyone agreed that a PAGA plaintiff must be an “aggrieved employee.” Reins International argued that Kim was no longer aggrieved once his individual claim for relief was redressed. The high court disagreed, citing (1) PAGA’s statutory language, (2) the statutory purpose of protecting employees, and (3) the overall statutory scheme allowing aggrieved employees to sue on behalf of the State of California. The high court concluded that an employee does not need to have an unresolved injury to pursue a PAGA claim. Instead, aggrieved employees retain standing to sue so long as they have allegedly suffered a relevant Labor Code violation. Settling a claim for such a violation does not make the employee any less aggrieved.

The high court did not address what happens when an employee settles the employee’s own PAGA claim. The settlement here expressly excluded the pending PAGA claim. It thus remains unresolved whether a PAGA plaintiff would be precluded from bringing a representative PAGA claim if the PAGA plaintiff agreed to settle it along with the individual Labor Code claims.

What Kim v. Reins International Means to Employers

This case is yet another example of judicial ingenuity coming to the aid of an employment plaintiff, while complicating efforts to resolve PAGA claims. Employers endeavoring to dispose of PAGA-related litigation must ensure that any settlement fully resolves all asserted claims.