On February 28, 2007, the California Court of Appeal held that employees’ ability to sue employers collectively under the Unfair Competition Law ("UCL") and the Private Attorneys General Act of 2004 ("PAGA") cannot be assigned to labor unions.  The Court further held that UCL representative actions must meet the procedural requirements established for class action lawsuits.  In Amalgamated Transit Union Local 1756 v. Superior Court, L.A.S.C. B191879, two labor unions that represent mechanics and transit operators filed a lawsuit on behalf of their members alleging that the defendant-employers had committed meal and rest period violations, failed to pay wages, and violated the UCL.  The unions also requested injunctive relief and restitution under the UCL and PAGA.  The lawsuit was brought as a representative action under the UCL and PAGA, rather than as a class action lawsuit.

More than 150 employees and former employees agreed in writing to assign to the unions their right to recover wages allegedly owed them.  The employees agreed that the purported assignments "includ[e] my right to sue in a representative capacity on behalf of current and former employees" under PAGA and the UCL.  The unions filed a petition for a writ of mandate with the Court of Appeal after the trial court held that they did not have standing to sue on the PAGA and UCL claims and were required to comply with class action procedures.

In considering the standing issue, the Court of Appeal explained the difference between a cause of action and a legislative grant of a procedural right to bring a representative action.  A cause of action arises out of a violation of a property right that pursuant to California public policy may be freely transferred or assigned.  In contrast, the right to sue in a representative capacity is not a cause of action or any other form of property right.  Authorization to bring a representative suit is conferred by the Legislature and the person authorized to bring suits on behalf of others has no power to assign that authorization to a third party.

Both the UCL and PAGA permit injured or aggrieved persons to seek relief for themselves and on behalf of other similarly aggrieved individuals, but they do not create an independent cause of action.  Indeed, any UCL or PAGA causes of action is based on a violation of an underlying statute (i.e., the Labor Code).  Accordingly, the Court held that although individual employees could assign to the unions their right to bring a cause of action for unpaid wages, the employees did not "own" the right to bring a representative action on behalf of others and therefore could not assign this right to the unions.  Therefore, the employees’ right to sue in a representative capacity for UCL and PAGA claims could not be assigned and the unions did not have standing on these claims.

The Court also held that Proposition 64, a voter initiative, required UCL representative actions to meet the certification requirements established for class action lawsuits.  The unions argued that although the text of Proposition 64 states only that a claimant must "compl[y] with Section 382 of the Code of Civil Procedure", it is unclear that class certification is required because C.C.P. 382 itself does not contain any class certification requirements.  However, the Court took judicial notice of Proposition 64’s "Voter Information Guide" and noted that the Guide explained to the electorate that a "yes" vote meant that representative actions under the UCL "would have to meet the additional requirements of class action lawsuits."  Therefore, the Court held that it is clear that the electorate intended to require UCL lawsuits to comply with the procedural requirements for class action lawsuits.

As a result of the Court’s holding, the ability of unions to bring representative actions against employers has been substantially curtailed.  Moreover, the application of class action procedural requirements to representative actions permits a variety of defenses that did not clearly apply to representative actions before this ruling.