On November 23, 2005, a California Court of Appeal issued the first appellate court decision regarding application of the Labor Code Private Attorney General Act of 2004 (“PAGA”), Cal. Labor Code §§ 2698 et. seq., in Caliber Bodyworks, Inc. v. Superior Court, Case No. B184120, ___ Cal.App.4th ____. PAGA, also not so fondly known by employers as the “Sue Your Boss Law,” permits a current or former employee to initiate private civil actions on behalf of himself or herself and other current or former employees to recover civil penalties.

On August 11, 2004, PAGA was amended to include an administrative procedure that the employee must exhaust as a prerequisite to filing a civil suit. The administrative procedure in California Labor Code Section 2699.3 requires notice to the California Labor and Workforce Development Agency (“LWDA”) and the employer and waiting a prescribed period of time to permit the LWDA to investigate and decide whether to cite the employer for the alleged violations. The long list of the Labor Code sections to which PAGA’s administrative requirements apply is set forth in California Labor Code section 2699.5.

The Caliber case involved a class action lawsuit by Hector Herrera in which Mr. Herrera alleged that defendant Caliber Bodyworks, Inc. failed to:

  1. comply with California’s minimum-wage requirement

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  2. indemnify employees for losses incurred in the direct consequence of the discharge of their duties and properly itemize deductions from wages
  3. compensate for overtime and all hours worked
  4. pay earned wages to former employees upon discharge
  5. provide required meal and rest periods
  6. properly compensate employees for working split shifts; and
  7. maintain required employee time records

Mr. Herrera sought civil penalties, statutory penalties and unpaid wages for these claims. Additionally, Mr. Herrera brought an unfair competition claim for equitable relief under California Business and Professions Code Section 17200 et. seq., in order to extend the statute of limitations for recovery of unpaid wages from three years to four years.

Mr. Herrera contended PAGA’s administrative prerequisites to filing suit did not apply in his case because the complaint did not include claims or make any allegations under PAGA. According to Mr. Herrera, nothing in PAGA modifies or restricts the right of an employee to remedy wage-and hour violations of the Labor Code through a class action lawsuit against his or her employer when the employee is not suing under PAGA itself. Caliber Bodyworks, on the other hand, argued that Mr. Herrera’s entire complaint should have been dismissed because each of Mr. Herrera’s causes of action sought penalties for violations of statutes listed in section 2699.5. The Court found that both parties were incorrect, and the application of PAGA was not as simple as either side maintained.

According to the Court, the administrative requirements of PAGA applied regardless of whether a plaintiff pled PAGA claims when the remedies being sought were remedies clearly covered by PAGA’s statutory scheme. Unfortunately for employers, the Court then limited the application of PAGA, holding:

  1. an employee’s cause of action must be one of the provisions listed in California Labor Code Section 2699.5; and
  2. must seek recovery of a “civil penalty” assessable by the LWDA to be subject to PAGA’s administrative requirements

The Court held the administrative requirements applied only to civil penalties brought under PAGA, and not to statutory penalties, claims for unpaid wages (such as overtime pay), or equitable relief claims (California Business and Professions Code §§ 17200, et. seq.). The Court based its decision on California Labor Code section 2699(a), which specifically stated that a plaintiff had to exhaust PAGA administrative remedies before bringing a claim for civil penalties and section 2699(g)(1), which provides, “Nothing in [PAGA] shall operate to limit an employee’s right to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under [PAGA].”

In order to clarify the difference between statutory and civil penalties, the Court noted that statutory penalties provided by the Labor Code for employer wage-and-hour violations were recoverable directly by employees well before PAGA became part of the Labor Code. In contrast “civil penalties” previously could only be enforced by the State’s labor law enforcement agencies. An example of the former is California Labor Code section 203, which obligates an employer that willfully fails to pay wages due an employee who is discharged or quits to pay the employee, in addition to the unpaid wages, a penalty equal to the employee’s daily wages for each day, not exceeding 30 days. An example of the latter is California Labor Code section 225.5, which provides, in addition to any other penalty that may be assessed, an employer that unlawfully withholds wages in violation of certain specified provisions of the Labor Code is subject to a civil penalty in an enforcement action initiated by the Labor Commissioner in the sum of $100 per employee for the initial violation and $200 per employee for subsequent or willful violations.
Unfortunately for employers, the Caliber Court’s decision did not support the procedural safeguards that many California employers hoped would be created by the PAGA amendments. If anything, Caliber exemplifies the complex compliance requirements of California’s wage and hour laws and the complex remedies and procedural requirements involved in wage and hour litigation. If you are subject to a wage and hour claim, you should immediately retain counsel with extensive wage and hour litigation experience to ensure all substantive and procedural safeguards are fully used to protect your rights.