State court says worker law gutted by high court is still on
When the U.S. Supreme Court ruled in June that workers in California could not use a unique state law to join together and sue their employers, Justice Sonia Sotomayor said California's courts, the final interpreters of state law, could still reach a different conclusion.
Now a state appeals court has borne out her prediction.
In a case initially filed in Contra Costa County and later transferred south, the Fifth District Court of Appeal in Fresno issued a precedent-setting decision Friday saying employees can ask a judge to penalize an employer for violating co-workers' rights under labor laws, such as laws regulating minimum wages, meal and rest breaks and overtime.
The suits are authorized by a 2004 California law, the Private Attorneys' General Act, or PAGA. They are filed in the name of the state, which receives 75% of any penalties awarded by the courts, with the rest going to the workers.
“A federal court's interpretation of California law is not binding,” even if it comes from the nation's highest court, Justice Donald Franson wrote in the 3-0 ruling. He said allowing employees to sue for state labor law violations serves the law's “remedial purpose, which PAGA achieves by deputizing employees to pursue civil penalties on the state's behalf.”
Business groups have long opposed PAGA, calling it a windfall for lawyers and a burden on the economy, and have qualified an initiative for the 2024 ballot that would repeal the law.
The central dispute in the court cases is whether PAGA prevents employers from enforcing mandatory agreements in workers' contracts to take all disputes to individual arbitration rather than suing in court, a common requirement in large companies.
Arbitrators' decisions are virtually unappealable, and studies have found that they usually favor employers, their frequent customers.
In the Supreme Court's 8-1 ruling, Justice Samuel Alito noted that the contracts are signed by employees as well as employers and said both sides were entitled to the “freedom … to determine the issues subject to arbitration.”
But the state appeals court said an employee's individual arbitration agreement did not affect co-workers' rights to be protected by state labor laws, or to share in the monetary penalties provided by PAGA. The court said the former employee in this case must arbitrate her individual claims but could still represent other employees under the state law.
“PAGA has been the primary enforcement for these labor laws,” and under the new ruling, “PAGA representative actions are now alive and well,” Matthew Bainer, a lawyer for the former employee, said Monday.
Michael Rubin, a San Francisco labor lawyer who represented the employee in the U.S. Supreme Court case, said the new ruling “makes clear that an employer cannot strip its workers of their right to pursue PAGA claims by trying to split those claims between arbitration and court.”
The suit was filed by Tricia Galarza, a former assistant manager at a Dollar General store in Kern County, who accused the company of violating state wage and hour rules.
An attorney for Dollar General did not respond to a request for comment on the ruling. The company could appeal to the state Supreme Court, which is considering a similar issue in a driver's suit against the food-delivery company UberEats over its refusal to reimburse drivers for work expenses, like the cost of fuel. The court has not yet scheduled a hearing.
State Attorney General Rob Bonta has urged the court in that case to reinstate employees' right to sue under PAGA, saying it was crucial for enforcement of workplace protections. With more than 1.6 million employers subject to state regulation, he said, state inspectors were able to conduct only 1,734 inspections in a recent year.
State legislators have also discussed rewriting PAGA to clarify employees' right to sue. If the law remains unchanged, its meaning will likely be determined by the state Supreme Court in the UberEats case, possibly by late summer or early autumn.
In the meantime, Franson said in Friday's decision, the appeals court is publishing its ruling “to provide guiding precedent” for trial courts around the state.