On Thursday, the Supreme Court of California ruled that there is no Private Attorneys General Act of 2004, California Labor Code § 2698, et seq. (PAGA) claim for the penalty relating to the "amount sufficient to recover underpaid wages" in California Labor Code § 558(a)(2). In ZB, N.A. v. Superior Court1, the Court ostensibly teed up the question, on which there was a split of authority, of whether the rule that PAGA claims could not be compelled to arbitration applied to a PAGA penalty requiring restitution of underpaid wages, under California Labor Code § 558, to resolve a split in authority. The result - that there is no underpaid wage PAGA penalty in the first place - is a disappointing blow to protections for workers' rights.
In reaching this decision, the Court concluded that the amount specified by the phrase "amount sufficient to recover underpaid wages" is not a "civil penalty" but is instead compensatory relief that may be recovered in addition to, and separate from, the civil penalties. It further analogized § 558 to California Labor Code § 1197.1, which provides for the recovery of "an amount sufficient to recover underpaid wages" in addition to the section's civil penalties, and concluded that the Legislature must have intended for the civil penalties to be separate from the "amount[s] sufficient" described in each respective section.
The Court opined that its decision would "enhance and streamline enforcement of the Labor Code's overtime and workday requirements." But it is difficult to see how removing a valuable arrow from the State's PAGA enforcement quiver can further these goals. Less clear still is how the Court's decision can be squared with the Legislature’s clear intent to permit PAGA plaintiffs to recover the full measure of relief that would be available to the State in a public enforcement action and preserve the deterrence scheme that the Legislature envisioned. These points are particularly salient, as this firm has previously written, because arbitration has the effect of killing statutorily-protected claims and emboldens law-violating employers by further skewing the playing field against workers.
Moving forward, the ZB decision has the impact of limiting the scope of potential PAGA recovery, although legislative amendment could restore the full measure of PAGA relief that, we believe, was originally intended. Regardless, PAGA will continue to be an important enforcement tool for the State, aided by the workers themselves and their advocates. Importantly, ZB did nothing to disturb the Court's prior holding in Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348, that PAGA is a qui tam statute where workers stand in the shoes of the State in prosecuting wage claims, with waivers of the State's prosecutorial authority unenforceable as a matter of state law. Iskanian has survived repeated challenges in the Ninth Circuit Court of Appeals, and has been denied certiorari time and time again by the U.S. Supreme Court.
If you are seeking to assert wage claims representing your co-workers and are facing an employer who seeks to force you into individual arbitration, contact Bryan Schwartz Law.