Ruling confirms courts can strike unmanageable PAGA claims

On Sept. 9, the California Court of Appeal, in Wesson v. Staples the Office Superstore, LLC, 2021 DJDAR 9462, issued a significant decision of first impression that provides employers with a rare victory and a defense against representative actions under the Private Attorneys General Act, based on manageability.

PAGA Background

Under the PAGA, an "aggrieved employee" is empowered to bring a PAGA representative action on behalf of themselves, other "aggrieved employees," and the State of California to seek penalties for alleged violations of the California Labor Code.

PAGA actions have become increasingly common as courts have consistently eroded employers' ability to defend against such actions. For well over a decade, courts have expanded the law's scope, including in three seminal cases:

• In 2009, the California Supreme Court, in Arias v. Superior Court, 2009 DJDAR 9631, held that an employee may bring an action for civil penalties on behalf of other "aggrieved employees" pursuant to the PAGA without complying with California class action procedure and associated protections.

• In 2014, the California Supreme Court, in Iskanian v. CLS Transportation of Los Angeles, 2014 DJDAR 8037, held that arbitration agreements requiring employees, as a condition of employment to waive the right to bring representative actions under the PAGA, is contrary to public policy.

• In 2018, the California Court of Appeal, in Huff v. Securitas Sec. Servs. USA, Inc., 2018 DJDAR 4922, held that an employee who brings a representative action under the PAGA may seek penalties not only for the Labor Code violation that affected him or her, but also for different violations that affected other employees.

In a rare limitation to the PAGA's scope, in Wesson, the Court of Appeal held that trial courts have the inherent authority to manage complex litigation, and under this authority can evaluate whether PAGA claims can be manageable at trial, and if not, to strike the PAGA claims.

The Wesson Decision

Wesson worked for Staples as a store general manager and brought an action against Staples, asserting class and representative claims under the PAGA on behalf of himself and nearly 350 other current and former Staples GMs in California. Wesson alleged that Staples had misclassified its GMs as exempt executives and, among other claims, owed the allegedly aggrieved employees overtime and penalties for missed meal and rets breaks.

The trial court denied Wesson's motion to certify a class, concluding that he had not demonstrated that his claims were manageable because there was too many variation in how Staples GMs performed their jobs and the extent to which they performed non-managerial tasks. The evidence showed that there were wide variation among GMs, including in the experience of the GMs, the store sizes, the sales volumes, the staffing levels, the budgets allocated to stores, among other variables. Staples argued, accordingly, that Wesson's claims would require individualized assessments and would lead to "an unmanageable mess." The court agreed and denied class certification.

Following the court's denial of class certification, Staples moved to strike Wesson's PAGA claim, pointing to the same evidence related to denial of certification and invoking the court's inherent authority to manage complex litigation. In opposition, Wesson argued that the trial court lacked authority to ensure that PAGA actions are manageable. After providing Wesson the opportunity to present a trial plan, the trial court ultimately granted Staple's motion to strike and dismissed Wesson's PAGA claim. Wesson appealed.

The California Court of Appeal upheld the trial court's decision and made the following two relevant holdings:

First, The trial court has inherent authority to ensure that a PAGA claim can be fairly and efficiently tried, which includes the authority to strike an unmanageable claim. In reaching this conclusion, the Court of Appeal reasoned that "PAGA claims may well present more significant manageability concerns than those involved in class actions," including because plaintiffs are not required to "establish a well-defined community of interest, encompassing a showing that common questions predominate over individual ones."

Second, Staples was entitled to a fair opportunity to litigate available affirmative defenses, which a manageability assessment had to take into account, because due process required a fair opportunity to present a defense. Wesson argued that he did not need to present a trial plan and that, instead, a claim is manageable so long as the plaintiff's prima facie case is provable by resort to common evidence. The Court of Appeal found that the assessment of whether a PAGA claim is manageable also extends to a defendant's affirmative defenses. In sum, the defendant must have "a fair opportunity to litigate their affirmative defenses in some way, even if that entails individualized evidence."

Key Takeaways

Wesson is a welcomed victory at a time when employers are increasingly finding themselves inundated with PAGA litigation. Indeed, Wesson provides a much needed limitation to the ever expanding scope of the PAGA, a trend that has prevailed for over a decade.

Employers, however, should not expect courts to routinely strike PAGA claims. After all, the Wesson court explicitly stated that courts "should not lightly strike even procedurally challenging claims," and if possible, "the court should work with the parties to render a PAGA claim manageable by adopting a feasible trial plan or limiting the claim's scope." Indeed, Wesson did not cooperate with the trial court's inquiry about a trial plan -- a helpful fact for Staples.

That said, the Wesson decision will help employers embroiled in PAGA litigation to at least limit their far-reaching PAGA claims and should result in many PAGA claims being stricken as unmanageable. To that end, employers should think about the application of the Wesson decision early in the litigation and how it can best be used to narrow or dismiss PAGA claims. Initially, employers should carefully asses and assert all applicable affirmative defenses in their responsive pleadings. After the pleadings stage, employers should carefully analyze the facts of the case to determine whether there may be manageability issues, either with the plaintiffs prima facie case or the employers affirmative defenses. Ultimately, we should see an increase in motions to strike PAGA claims as unmanageable.