California Supreme Court’s Estrada Decision Leaves Employers with a Wide Array of Tools to Attack PAGA Actions – Including Seeking to Strike Claims “Without Prejudice”

On January 18, 2024, the California Supreme Court issued its much-anticipated decision in Estrada v. Royalty Carpet Mills, resolving a dispute among the appellate courts and concluding that Private Attorneys General Act (“PAGA”) claims may not be stricken as unmanageable. 

While some have read the decision as a resounding victory for the plaintiffs’ bar that will force every PAGA case to settle for large amounts, the decision does no such thing.

It may challenge employers and their lawyers to be more creative, but it does not mean that every PAGA action now warrants an outsized settlement or that the courts must try every PAGA action, no matter how large the case is or – to use a word that should rarely appear again in any PAGA brief – how “unmanageable.” 

To start, while the Estrada Court concluded that trial courts lack the authority to “strike” PAGA claims as unmanageable, it expressly defined “strike” in the very first footnote to mean “to dismiss with prejudice.”  (Emphasis added.) That footnotes leaves available the opportunity to seek to have a court dismiss PAGA claims without prejudice.  In other words, under the proper circumstances, courts can still strike entire PAGA claims or claims of significant portions of the PAGA representative group -- such as persons working in particular positions, locations or business units -- without prejudice.

The Court was also clear that it was not disturbing the other case management tools that can be used to ensure that PAGA cases are tried “efficiently, fairly, and effectively,” noting that there are other ways that employers can challenge PAGA actions so long as they do not rely on the concept of “manageability.” 

Oddly, while saying repeatedly that PAGA actions are not class actions such that the manageability requirement of class actions is not found in PAGA actions, the Court relied on its prior class action decision in Duran v. U.S. Bank Nat’l Ass’n, 59 Cal. 4^th 1 (2014) to discuss how PAGA claims could be managed – and how they could be challenged. Those who have defended class actions know how difficult it has been for plaintiffs to use the tools discussed in Duran – surveys and sampling – while preserving a defendant’s due process rights.

And a significant portion of the Estrada decision is focused on employers’ due process rights.

That suggests that rather than moving to strike PAGA claims as unmanageable, employers can and should look to strike the claims if they cannot be tried without denying the employer of its due process rights.  

That will likely be the case in a great many PAGA actions, if not most.

Employees can only recover PAGA penalties for pay periods in which they suffered a violation of certain Labor Code sections.  If an employee suffered no violation in a pay period, he or she is not entitled to a PAGA penalty for that pay period.  Just because the named plaintiff can show that he or she was deprived of a meal period on one day, for instance, does not mean that any other employee was also denied a meal period, much less denied a meal period in every pay period.  Employers will need to demonstrate why they must be permitted to present different evidence as to each employee – and cross-examine each employee.

The Estrada Court also made clear that it remains the plaintiff’s obligation to establish PAGA violations, which itself suggests some potential strategies to establish that the plaintiff cannot do that, including demanding a trial plan, then showing how the trial plan is deficient -- such as how it would deprive the defendant of its due process rights.

Among the other case management tools available to employers and courts in PAGA actions are:

1. Demurring to the complaint on the grounds that it is overbroad or insufficiently specific. Challenging plaintiffs’ PAGA allegations at the outset of the case will likely be done more often than before. Courts may be less likely to accept boilerplate PAGA complaints vaguely alleging violations of the law and more likely to narrow the claims or the definition of the PAGA group at the outset.  
2. Moving to bifurcate and litigate or try the named plaintiff’s claims first. If the employer prevails on the named plaintiff’s claims, whether through a summary judgment motion or trial, the named plaintiff is no longer an “aggrieved employee” and no longer has standing to proceed with the PAGA representative action. Judges may be very willing to bifurcate claims if it could avoid tying up their courtrooms for months to try a PAGA action.  
3.  Moving to narrow the definition of the PAGA group or to strike a portion of the PAGA group. There is nothing in Estrada that would prohibit a court from redefining or striking a portion of the proposed PAGA group, particularly if needed to preserve due process rights.
4. Moving for summary judgment or partial summary judgment.  There is nothing preventing an employer from moving for summary judgment, or partial summary judgment, as to the plaintiff, the entire PAGA group, or a portion of the PAGA group.

There are few judges who wish to tie up their courtrooms for months trying a single PAGA action, and every reason to believe that judges will be receptive to employers’ efforts to reduce or dismiss those actions – just as long as they don’t use the word “manageability.”