Monday, March 23, 2020

In Kim, California Supreme Court Protects Employees' Rights to Bring PAGA Claims

Earlier this month, the Supreme Court of California ruled that an employee does not lose standing to pursue a claim under the Private Attorneys General Act of 2004, California Labor Code § 2698, et seq. (PAGA) where that employee settles and dismisses his or her individual claims. In Kim v. Reins International California, Inc. (full opinion here), the Court rejected the employer’s injury-focused argument that an employee who settles his or her individual claims is no longer a “person aggrieved” for purposes of PAGA. The result is a positive judicial step in the right direction in ensuring that PAGA will continue to be a viable tool that may be used to protect the public interest in enforcement of the State’s labor laws.

The Plaintiff in Kim brought a putative class action claiming that he had been misclassified as exempt from overtime laws. The operative complaint alleged claims for failure to pay wages and overtime (Cal. Labor Code § 1194), failure to provide meal and rest periods (Cal. Labor Code § 226.7), failure to provide accurate time statements (Cal. Labor Code § 226(a)), waiting time penalties (Cal. Labor Code § 203), and unfair competition (Cal. Bus. & Prof. Code § 17200). It also sought civil penalties under PAGA. The employer compelled Plaintiff to arbitration and the PAGA litigation - which could not be compelled to arbitration, under Iskanian v. CLS Transportation Los Angeles (as explained here) - was stayed pending arbitration. While the PAGA action was stayed, the employer made a statutory offer to settle Plaintiff’s individual claims pursuant to Cal. Code Civ. Proc. § 998. Despite the settlement encompassing only Kim's "individual claims" (as discussed in footnote 7 of the Supreme Court opinion), the company sought and the court granted summary adjudication on the PAGA claim, concluding that Plaintiff lacked standing because his rights had been completely redressed by the settlement of his individual claims. The Appellate Court affirmed, leaving the California Supreme Court to weigh in on standing in PAGA cases.

Looking to the statutory language, the Supreme Court concluded that the settlement of individual claims does not strip an individual employee of standing to bring a PAGA claim. First, the plain language of PAGA only requires that a plaintiff be an aggrieved employee – someone “who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.” In rejecting the employer’s argument that a continuing injury was required to meet this definition, the Court explained that an injury-centric focus was misplaced as PAGA standing is defined in terms of an employer’s violations rather than an employee’s injuries. PAGA does not require an employee to claim any economic injury resulted from a labor violation, only that the labor violation itself occurred. Whereas the employer’s reading would read in requirements not found in the text itself, PAGA’s language only requires that an employee have suffered “one or more of the alleged violations” committed, which permits an employee to serve as a PAGA representative for violations that the employee did not personally experience, as the Court of Appeal in Huff v. Securitas had explained (see our amicus brief here for discussion of Huff).

The Court went on to discuss that injury is not a requirement for civil penalties; damages and civil penalties serve different purposes. In the case of PAGA, the statutory purpose is to remediate present violations and deter future violations as a matter of public interest, not to redress employees injuries. The Court also distinguished PAGA actions from class actions, emphasizing that whereas in a class action the representative only possesses his or her own claim for relief, a PAGA claim is brought on behalf of all affected employees as the state’s designated proxy, as in a qui tam action.

Turning to broader policy considerations, the Court explained that a narrower interpretation of who was an aggrieved employee for purposes of PAGA would have the effect of eliminating employees that settled their claims from the group of individuals eligible to receive a share of the penalties, which in turn would mitigate or potentially completely eliminate the amount of penalties that the state could collect. The Court also reasoned that, in light of plaintiffs' recognized ability to bring stand-alone PAGA claims, standing for a PAGA claim cannot be dependent on the maintenance of an individual claim as PAGA-only cases are not cases in which individual relief has been sought. Further, as there are numerous Labor Code violations that do not have a private right of action (for example, Cal. Labor Code § 558, which we previously discussed here) but can be vindicated in a PAGA action, it would be inconsistent to require a plaintiff to have an unredressed injury to have standing. Finally, the Court rejected as unsupported the employer’s arguments that the legislative history supported its argument or that Plaintiff should be precluded from raising his claim.

Notably, the Court also described Reins's conduct as "troubling." Specifically, Reins explicitly carved out Plaintiff's PAGA claim and made its settlement offer pursuant to California Code of Civil Procedure § 998, which permits defendants to recover defense costs if a jury awards a smaller award to the plaintiff than the defendant previously offered in settlement. The Court opined that "if Reins's prior conduct did not amount to an estoppel, this turnabout was hardly fair play," and observed that reaching a contrary holding would present plaintiffs with a difficult choice: "either reject the offer and risk incurring substantial liability for costs or accept the offer and lose the ability to pursue the PAGA claim."

Ultimately, the Court’s ruling in Kim is an important step in protecting employees’ rights by upholding a system designed to ensure that California’s Labor laws are properly enforced. PAGA remains an important and efficient tool in curbing an employers’ widespread misconduct. If you are seeking to assert wage claims representing your co-workers, contact Bryan Schwartz Law.

Rights and Resources for Workers in the Era of COVID-19

Bryan Schwartz Law wants workers to know their rights and what resources are available to them during the coronavirus pandemic.

  •  Legal Aid at Work has also prepared an FAQ on coronavirus and the workplace in English, Spanish, and Chinese.
  • Legal Aid at Work is conducting clinics virtually for workers throughout the state.
  • Bet Tzedek’s Employment Rights Team will be holding weekly virtual clinics each Wednesday from 5-7pm PST. Those interested in making an appointment should call Bet Tzedek’s main line at 323-939-0506 extension 415.
  • The Center for Workers' Rights is operating a Coronavirus Job Protection Helpline to help answer questions about workplace rights. Call 916-905-1625 from 9 am - 5:30 pm M-F. If you are in the Sacramento area, you can reach the line by dialing 211.
  •  If you are undocumented:

o    Here is a list of California relief funds in English and Spanish for those who have lost their jobs due to coronavirus.
o    The California Immigrant Youth Justice Alliance has put together resources in various languages, including English, Spanish, and Portuguese.

This is not a comprehensive list, but we hope that it can help workers feel more protected during this difficult time. We encourage folks to follow the organizations mentioned above on social media for real-time information.

We are lucky in California to have so many organizations that are dedicated to protecting workers’ rights and strong laws protecting workers. We’re in this together. If you feel like your rights are being violated in the workplace, contact Bryan Schwartz Law today.

Wednesday, March 11, 2020

Gender Pay Gap: Prior Pay is No Excuse

It is generally illegal for employers to pay employees differently due to their sex under the federal Equal Pay Act. But does this ban include pay differentials based on prior salary? According to a welcome decision by the Ninth Circuit Court of Appeals, the answer is yes. The court’s ruling is especially notable in that it recognizes the systemic wage disparities that have historically handicapped women in the workforce.

The Ninth Circuit handed down Rizo v. Yovino for a second time on February 27, 2020—the Supreme Court vacated the previous decision because its author died eleven days before the decision was issued. The case was brought by math consultant Aileen Rizo, who was hired by the Fresno County Office of Education in 2009.  Based on Ms. Rizo’s prior salary, she was placed at Step 1, Level 1, for a compensation of $62,133 for 196 days of work, plus $600 because she has a master’s degree. Fresno County calculated this pay according to its policy that applied uniformly to men and women: increasing an employee’s prior wages by 5% and placing the employee on the corresponding pay scale.

Three years later, Ms. Rizo realized she was the only female math consultant in Fresno County, and she earned the lowest pay. She also discovered that a newly-hired male colleague was placed on Level 1, Step 9, a much higher salary than Ms. Rizo earned even after three years working for Fresno County, though Ms. Rizo possessed greater education and experience.

She sued. Fresno County defended that its reliance on past pay was a neutral basis that complied with the Equal Pay Act. The decision was rejected by a federal district court, and the 9th Circuit en banc, in a decision written by Judge Reinhardt. After the Supreme Court vacated the en banc decision because Judge Reinhardt passed away before the 2018 opinion was published, the reconstituted 9th Circuit en banc—with another judge from the circuit replacing Judge Reinhardt—came to the same conclusion, ruling, “Allowing employers to escape liability [under the Equal Pay Act] by relying on employees’ prior pay would defeat the purpose of the Act and perpetuate the very discrimination the EPA aims to eliminate.”

The decision considered the fourth statutory exception to the Equal Pay Act, which allows employers to differentiate employees’ pay using “a differential based on any other factor other than sex.” The Ninth Circuit determined only that job-related factors—such as shift differentials, time of day worked, hours of work, work duties, or experience—satisfy this exception. Rejecting Kouba v. Allstate Insurance Company (9th Cir. 1982) 691 F.2d 873, the court held that reliance on prior pay is by itself insufficient for an employer to show that sex provided no part of the wage difference:

We do not presume that any particular employee’s prior wages were depressed as a result of sex discrimination. But the history of pervasive wage discrimination in the American workforce prevents prior pay from satisfying the employer’s burden to show that sex played no role in wage disparities between employees of the opposite sex.
The Ninth Circuit recognized pervasive gender disparities in pay, especially as it affects minority communities, noting that “[t]hese differences are even more pronounced among women of color…. Women of all races and ethnicities earn less than men of the same group…and economic literature suggests that even after accounting for certain observable characteristics—such as education and experience—an unexplained disparity largely persists.” This observation is especially apt in the digital age, which threatens to enshrine historical bias against women in algorithms.

In another notable aspect of the decision, the Ninth Circuit reiterated that the plaintiff in an Equal Pay Act case need not demonstrate discriminatory intent. Unlike in Title VII claims, a showing of pretext is not required if the employer attempts to establish a defense.

The majority decision also rejected the argument that employers should be able to set employee salaries based on prior pay in conjunction with other valid bases, such as experience and skills, because the valid business reasons alone would be sufficient for an employer to defend against an Equal Pay Act claim. The court conceded that an employer may use prior pay as a basis for negotiating job offers or setting starting salaries, but employers would nonetheless have to defend against Equal Pay Act claims without relying on prior pay. California’s pay privacy law does not allow employers to inquire about past pay. Cal. Lab. Code § 432.3.

If you believe you are being paid less because of your sex, contact Bryan Schwartz Law.