Good News For California Employers - PAGA Does Not Provide A Second Bite At The Apple

Shutting down a fledgling cottage industry before it could pick up much steam, the recent California Court of Appeal decision in Deleon v. Verizon Wireless held that a separate Labor Code Private Attorneys General Act of 2004 (PAGA) action may not be brought seeking penalties under the Labor Code when the underlying wage-and-hour claims have already been dismissed with prejudice via a class action settlement.

Under PAGA, the so-called "Bounty Hunter Law" which is codified at Labor Code section 2698, et seq., employees can recover, on behalf of themselves and other similarly situated employees, civil penalties for a variety of Labor Code violations that were once only recoverable by the State of California and its regulating governmental agencies, including the Labor Commissioner. In recent years, some plaintiffs' attorneys have carefully scrutinized class action settlements to determine whether they released PAGA claims and, if not, have filed piggy-back actions seeking only PAGA penalties for the otherwise previously settled claims. Employers, believing they had previously settled the Labor Code claims at issue, have been left to grapple with these follow-on lawsuits which have, in essence, forced them to litigate the underlying claims a second time.

The Deleon court held that this second bite at the apple is not appropriate. After settlement of a class action lawsuit that did not allege PAGA claims, Deleon, an opt-out plaintiff, brought a new putative class action suit alleging the same facts over much of the same time period solely based on PAGA and the relief available thereunder. The Court of Appeal held that, because both the settled claims and the PAGA claims arose from the invasion of the same primary right, the doctrine of res judicata barred the later PAGA suit as to any putative class members who did not opt out of the prior settlement.

While the California Supreme Court has not expressly addressed the res judicata bar of PAGA claims, at least for now employers can breathe a collective sigh of relief that enterprising plaintiffs' counsel have less incentive to troll the docket looking for previously settled cases to find opportunities to bring additional lawsuits based on the absence of PAGA claims and releases in the initial litigation.