California Supreme Court Holds that Trial Courts Do Not Have Inherent Authority to Strike Down PAGA Claims on Manageability Grounds

California Supreme Court Holds that Trial Courts Do Not Have Inherent Authority to Strike Down PAGA Claims on Manageability Grounds

Yesterday, in Estrada v. Royalty Carpet Mills, Inc., the Supreme Court of California (Chief Justice Guerrero, writing for the unanimous court) held that trial courts do not have the inherent authority to strike down Labor Code’s Private Attorney General Act (PAGA) claims on manageability grounds. This holding is a significant win for workers’ rights, as it affirms employee rights under PAGA, a critical tool for holding employers accountable for Labor Code violations.

PAGA allows an aggrieved employee (i.e., one whose rights under the Labor Code were violated) to seek civil monetary penalties on behalf of the state as a representative. Importantly, PAGA allows an aggrieved employee to seek penalties for Labor Code violations committed by her employer against other employees. This feature of PAGA means that for an employer who frequently violates labor laws, a PAGA action can be costly. Under the Estrada holding, employers cannot avoid penalties by arguing that an employee’s claim are too difficult for a court to adjudicate, even if those claims involve labor law violations against numerous coworkers.

In Estrada, the Plaintiffs were a group of 13 former Royalty Carpet Mills (“Royalty”) employees who brought a class action complaint against Royalty. The complaint raised class claims based on Royalty’s failure to provide first and second meal periods to its employees for nearly eight years, and it also raised PAGA claims based on a variety of Labor Code violations. In June 2017, the court certified the plaintiffs’ proposed class and three subclasses. The case then went to trial.

After the evidence was presented at trial, the trial court decertified the classes. In that same order, echoing its reasons for decertifying the class, the court dismissed the Plaintiffs’ PAGA claims, finding that they were not manageable. The Plaintiffs challenged this order on appeal, arguing that the trial court abused its discretion in decertifying the class and erred in dismissing their PAGA claims. The Court of Appeal agreed with the Plaintiffs, reversed the trial court’s order, and ordered for a new trial. Royalty then brought the case to the California Supreme Court for review, to address whether trial courts had the authority to dismiss PAGA claims on manageability grounds. The Estrada Court of Appeal split with another Court of Appeal, in Wesson v. Staples (2021) 68 Cal.App.5th 746, which had held that trial courts do have the ability to dismiss PAGA claims based upon manageability.

To support its holding that trial courts did not have inherent authority to dismiss PAGA claims on manageability grounds, the Supreme Court raised two points. First, the Court mentioned that the inherent ability for trial courts to strike down claims was significantly limited. In Lyons v. Wickhorst (1986) 42 Cal.3d 911, 915-16, the Supreme Court held that the ability of trial courts to dismiss claims was “tightly circumscribed” and could only be done under a narrow set of circumstances. These narrow circumstances were situations when a plaintiff failed to prosecute their claims, raised frivolous claims, or engaged in egregious misconduct, none of which applied in the present case.

Second, the Court also argued that it was not reasonable to impose the same manageability requirement in class actions to PAGA cases, because of structural and policy-related differences behind these two types of actions. The question of manageability is important in class actions, because a class-action plaintiff is raising several claims on behalf of a multitude of absent individuals. In contrast, PAGA plaintiffs represent only one institution—the California Labor Workforce Development Agency—on a variety of claims. Since PAGA actions do not represent individual claims of numerous people, the due process concerns in class actions (which demand an inquiry into manageability) do not apply to the same degree in PAGA actions. The Court emphasized that when PAGA was first enacted in 2003, the legislative intent for PAGA was to “maximize the enforcement of labor laws.” Conflating the manageability inquiry in class actions to PAGA cases would undermine the underlying legislative policy—that of encouraging and maximizing the enforcement of labor laws—of PAGA.

Moreover, in class actions, manageability should not be a major barrier, based upon Estrada, which concluded by citing Justice Tobriner’s opinion nearly fifty years ago in Blue Chip Stamps v. Superior Ct. (1976) 18 Cal.3d 381, 390 n.3, where he said: “No class action is inherently unmanageable,” because “a court always has access to a variety of techniques” to render the action manageable, and “[t]he critical question . . . is whether the techniques necessary to render . . . [the] action manageable are unconstitutional, or so distort the values a particular cause of action is meant to further that class suit would be improper.” (Estrada, Slip Op. at 44). In other words – where there’s a will to certify, there’s a way.

The Estrada decision is a significant victory for workers’ rights, as this holding prevents trial courts from striking down PAGA claims solely on the basis of manageability, and reminds trial courts not to make manageability a major barrier to class actions. Foreclosing another avenue for employers to dismiss PAGA claims should strengthen PAGA and therefore strengthen Labor Code enforcement, encouraging employees to bring their wage and other claims on behalf of their co-workers and the state to court.

If an entity like your company is involved in systemic wage and hour violations, it can be held accountable under Labor Code and under PAGA. If you believe that you have wage and hour violations at your company, please contact Bryan Schwartz Law, P.C..