Ignoring compelling legislative history opens PAGA floodgates

Over 10 years ago, the California Legislature implemented the Private Attorneys General Act because the administrative agency tasked with collecting civil penalties was overloaded, and it lacked the resources to bring those cases to court. PAGA deputizes private citizens to sue employers and recover civil penalties for underlying Labor Code violations.

Relying primarily on the fact the labor commissioner lacks the resources to pursue all Labor Code violations, the California Court of Appeal in Huff v. Securitas Security Services USA, Inc. recently held that any employee who was affected by at least one Labor Code violation can pursue civil penalties for other Labor Code violations suffered by other employees. 2018 DJDAR 4922 (May 23, 2018). The proverbial floodgates have opened: Now any employee can recover civil penalties for a cornucopia of Labor Code violations -- even those by which he was never affected.

In Huff, the plaintiff alleged that (as a temporary services employee) he had not been paid all of his wages on a weekly basis pursuant to Labor Code Section 201.3. The case proceeded to trial and the evidence established no violation of Section 201.3. Judgment was entered in favor of Securitas.

Huff moved for a new trial and argued that judgment was improper because he was permitted to collect PAGA penalties for other employees who were affected by a violation of Labor Code Section 201.3 -- even if he was not. The trial court granted the motion and the 6th District Court of Appeal upheld the decision.

PAGA states that only aggrieved employees may recover civil penalties thereunder. PAGA defines "aggrieved employee" as "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed." Labor Code Section 2699(c).

The court found this language unambiguously declared that if an employee suffered at least one Labor Code violation then he could collect PAGA penalties for any and all Labor Code violations that affected other employees. Under the court's reasoning, an employee who was not paid on a weekly basis, for instance, could conceivably collect PAGA penalties for other employees who were not paid overtime -- even if the former employee never worked hours that qualified as overtime or was always paid overtime for all overtime hours he worked.

Due to the court's conclusion that the definition of an "aggrieved employee" was unambiguous, it declined to consider PAGA's legislative history, which is only permitted where a statute is arguably ambiguous. As pointed out by defense counsel, PAGA's legislative history was critical to its position that an employee's remedies under PAGA were limited to the Labor Code violations only he purportedly experienced.

Securitas pointed to important statements made by PAGA's drafters confirming that only employees who were affected by a specific Labor Code violation could collect PAGA penalties for that violation. For instance, Securitas pointed to a statement attributed to the sponsors of PAGA that "unlike the UCL this Bill would not open private actions up to persons who suffered no harm from the alleged wrongful act ... private suits for Labor Code violations could be brought only by an 'aggrieved employee -- an employee of the alleged violator against whom the alleged violation was committed." (Emphasis added.) Assem. Com. on Labor and Employment, Analysis of Sen. Bill No. 796 (2003-2004 Reg. Sess.) July 9, 2003, p. 7.

The reference and the comparison to California's Unfair Competition Law here is significant. As many practitioners may recall, during the time period PAGA was proposed, any person could bring a representative action under the UCL regardless of whether or not they were injured by unfair competition. While the UCL was later amended to impose an "injury-in-fact" requirement, the opponents of PAGA were well aware that employers might suffer a similar fate at the hands of vigilante plaintiffs' lawyers seeking to cash in under PAGA if a similar requirement was not imposed:

"Opponents, on the other hand, argue that this measure, if enacted, will result in abuse similar to that alleged involving the UCL. For example, the Civil Justice Association of California (CJAC) argues that this bill will expose business to frivolous lawsuits and create a new litigation cottage industry for unelected private attorneys performing the duties of a public agency whose staffs are responsible to the general public. CJAC argues that similar private attorney general actions have resulted in an excessive amount of meritless, fee-motivated lawsuits. Allowing such 'bounty hunter' provisions will increase costs to businesses of all sizes, and add thousands of new cases to California's already over-burdened civil court system." Id.

The court's decision does not explore the possibility that the definition of "aggrieved employee" (insofar as it is one who suffers "one or more" Labor Code violations) is ambiguous. While the definition could be interpreted to mean an employee suffering at least one Labor Code violation has standing to recover penalties for other Labor Code violations, it could also mean an employee who suffers "one or more" Labor Code violations could collect PAGA penalties for those (one or more) Labor Code violations only he experienced. Had the court's decision considered the possibility that the statute was ambiguous, the Legislative history could (and should) have been considered.

That said, the Court of Appeal indicated that even if it had considered the legislative history, it would not have changed its opinion because "none of the purported expressions of intent relied on by Securitas made its way into the statute." It added, "PAGA's legislative history as a whole actually undermines Securitas' position" because PAGA was enacted to solve the problem of inadequate state enforcement resources."

State law enforcement only describes the overarching purpose of PAGA -- it does not explain how or why an employee who is completely unaffected by any Labor Code violation could or should be permitted to collect civil penalties on behalf of the State. Indeed, the requirement that an "aggrieved employee" only have suffered one Labor Code violation in order to enforce any other Labor Code provision is directly contradicted by the reassurance that PAGA would not succumb to the same pitfalls as the pre-amendment UCL.

Had the Huff court considered the ambiguity in the definition of "aggrieved employee" and read all of the comments contained within the legislative history in full context, it should have reached the opposite conclusion: that employees can only collect PAGA penalties for Labor Code violations they have experienced -- and not for Labor Code violations experienced purely by others. The Huff decision will therefore, arguably create abuse similar to that alleged involving the UCL before it was amended to require an injury in fact before filing suit.