On December 29, California’s Second Appellate District held that employees who settle and dismiss their individual wage claims may not assert claims under the state’s Private Attorneys General Act (“PAGA”) on behalf of other employees. PAGA allows employees to file lawsuits to recover civil penalties for violations of the California Labor Code on behalf of themselves, their fellow workers, and the State of California. To assert PAGA claims, employees generally do not have to meet the rigorous standards required for class certification.

In Kim v. Reins International California Inc., an employee sued his former employer, a restaurant operator, for wage and hour violations under the Labor Code. Mr. Kim sued on behalf of a class of all “training managers” currently or previously employed by Reins, claiming that they were misclassified and thus entitled to overtime, meal breaks and rest periods. The trial court judge dismissed the class claims, and ordered Mr. Kim’s individual wage claims to arbitration, as per the arbitration agreement he had signed during his employment. His PAGA claims, however, were stayed pending the arbitration’s resolution.

During the arbitration process, Mr. Kim settled his individual claims and dismissed them with prejudice. Reins then moved for summary judgment on the PAGA claims remaining in the state court action. The court granted the motion, noting that because Mr. Kim no longer had any viable Labor Code claims himself, he was no longer an “aggrieved employee” and lacked standing to assert a PAGA suit.

The Reins decision provides California employers with another basis for attacking meritless PAGA claims, reinforcing the concept that employees must actually have the same claims as those they purport to represent.

Please contact your Hogan Lovells labor and employment team with any questions concerning the ramifications of this decision for your business.