California Appellate Decision Recognizing Manageability Requirements for PAGA Actions May Provide Much Needed Relief to Employers

It is no secret that the Private Attorneys General Act (“PAGA”) has been a cash cow for plaintiffs’ counsel in California.

PAGA allows a single employee (and their counsel) to file suit on behalf of other employees for alleged Labor Code violations, without having to go through the class action mechanism.  In other words, a PAGA plaintiff can file suit seeking penalties for hundreds or thousands of employees, yet never need to show that there are common issues susceptible to common proof – or even that their own claims are typical of those of other employees.

As a result, there has been little to prevent plaintiffs and their counsel from filing massive PAGA actions on behalf of all of an employer’s employees, even without having any basis to believe that many those employees suffered any violation at all.

The in terrorem effect of a lawsuit seeking penalties on behalf of hundreds or thousands of employees has led to a great many multi-million-dollar settlements in which plaintiffs’ counsel typically take one-third of the recovery for themselves, often for doing little more than filing a boilerplate lawsuit and attending a mediation.

For years, employers have argued that PAGA claims should be stricken if the trial of such claims would not be manageable.  That would seem to be the case in many PAGA actions, particularly those with a large number of employees and highly individualized issues, such as whether, when and how employees worked off-the-clock or did not receive compliant meal or rest periods.

In a case involving 1,000 employees, even if 5 employees could take the stand each day to testify about their individualized experiences, trial would last 200 court days. That would seem to be unmanageable on its face.

And if a case involved 10,000 employees . . . well, you can do the math.

Some California trial courts have agreed that a PAGA claim cannot proceed if trial would be unmanageable, analogizing PAGA to claims under other statutes.

But other courts have been reluctant to impose a manageability requirement because no such requirement is expressly included in PAGA itself, and because there was no appellate decision imposing such a requirement in PAGA cases.

Now, employers have an appellate decision they can cite to – Wesson v. Staples the Office Superstore, LLC.

In Wesson, the California Court of Appeal concluded that “courts have inherent authority to ensure that a PAGA claim will be manageable at trial -- including the power to strike the claim, if necessary .. . .”

The Court of Appeal noted that the “evidence and argument before the trial court revealed no apparent way to litigate [the defendant-employer]’s affirmative defense in a fair and expeditious manner, as the defense turned in large part on [the allegedly agreement employees]’ actual work experience, yet there was extensive variability” in that group.  Given those individualized issues, there was no dispute that any trial would span several years because there would be hundreds of witnesses.  “The trial court reasonably concluded that such a trial would ‘not meet any definition of manageability,’” and the Court of Appeal affirmed.

Wesson should prove to be a huge development in PAGA actions, informing defense strategies and making it more important than ever to identify and highlight individualized issues that will make trial unmanageable.  And that should impact the negotiation of PAGA settlements where settlement is desirable, helping to drive down the settlement values in these cases.

The in terrorem effect that often drove large settlements may now be gone, matched by the argument that the PAGA claims could be stricken in their entirety.