Plaintiffs Are Not “Aggrieved Employees” And Cannot Sustain PAGA Claims If They Settle Their Underlying Non-PAGA Labor Code Claims

As background, PAGA is often referred to as the “bounty hunter” statute, where various California Labor Code violations can give rise to both PAGA and non-PAGA claims based on the same set of facts, though PAGA claims are generally subject to a shorter statute of limitations and 75% of the recovery of PAGA claims goes to the California Labor and Workforce Development Agency. PAGA claims have traditionally been brought in conjunction with class action claims, though in recent years, “PAGA-only” actions have been brought on a representative basis without class claims, possibly due to the rise of class action waivers. Only “aggrieved employees” as defined under PAGA can bring PAGA claims. Under PAGA, “’aggrieved employee’ means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”

In Kim v. Reins Int’l Cal., Inc., the plaintiff employee sued his former employer, alleging non-PAGA Labor Code claims such as failure to pay overtime and failure to provide meal and rest periods. He also alleged a PAGA claim based on the same facts, on a representative basis on behalf of himself and other employees. The non-PAGA claims were compelled to arbitration on an individual basis, while the PAGA claim was stayed in state court. During the arbitration, the employee accepted an offer to compromise under California Code of Civil Procedure section 998 and agreed to dismiss his individual non-PAGA claims with prejudice. As the PAGA claim was the only remaining claim, the stay on it was lifted by the court. The employer then successfully moved for summary adjudication on the PAGA claim, on the basis that the employee was no longer an aggrieved employee by virtue of settling his individual non-PAGA claims. The California Court of Appeal affirmed this ruling.

The Kim holding is consistent with a variety of other holdings in California state and federal courts that if the employee does not have viable underlying non-PAGA claims, he or she cannot sustain a PAGA claim.