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September 2021

California Court of Appeal Affirms “Manageability” Requirement for PAGA Actions

On September 9, 2021, California employers received some welcome news from the California Court of Appeal, which affirmed the inherent authority of a trial court to impose “manageability” requirements on Private Attorney General Act (“PAGA”) actions. (Wesson v. Staples the Office Superstore, LLC, No. B302988, — Cal.App.5th — (Sept. 9, 2021). This new decision will give employers a significant tool for defending PAGA claims, and will likely reduce the number of frivolous claims, and claims that require complex individual inquiries.

A PAGA case is a representative action, which is functionally similar to a class action, except that the plaintiff represents a group of “aggrieved employees” rather than a class (or proposed class). However, while there is a great deal of guidance on the procedural aspects of a class action, there has been a paucity of guidance with respect to PAGA claims. In a class action, there is a significant procedural aspect to every case where a plaintiff must meet a high threshold to show that the proposed “class” be certified as such, based on typicality, commonality, and adequacy standards (Sav-On Drug Stores, Inc. v. Super. Ct. (2004) 34 Cal.4th 319, 326). However, courts have declined to impose any obligation to “certify” the group of “aggrieved employees” (Arias v Superior Court  (2009) 46 Cal.4th 969, 980-88). In effect, to date, a PAGA action has functioned as a mini-class action, with substantial economic risk, and very few, if any procedural safeguards. The plaintiffs’ bar has exploited this situation to pressure defendants into large settlements.

Wesson changes that equation and affirms the authority of the trial courts to manage PAGA actions, and importantly, recognizes the right of a defendant to procedural due process. Although the California Supreme Court has held that PAGA claims must be “manageable,” (Williams v. Superior Court (2017) 3 Cal.5th 531, 559) there have been no prior published decisions for employers to rely on prior to Wesson.

Wesson involved a group of general managers for Staples, who the plaintiff contended had been misclassified as exempt employees, and was filed as a class action. Notably, misclassification theory cases are notorious for requiring individual analysis with respect to the duties of each class member, and are therefore inherently difficult to certify (Duran v US Bank (2014) 59 Cal.4th 1, at 30).  Staples successfully opposed class certification, and then moved to strike the PAGA claims on the basis that they were unmanageable, and a trial would violate Staples’ due process rights. The Court invited the plaintiff to submit a trial plan demonstrating manageability, but the plaintiff largely declined, arguing that manageability was not a requirement and, to the extent it was, it should only be limited to the prima facie case, not to affirmative defenses raised by the defendant. The court then proceeded to find Wesson’s PAGA claim unmanageable.  It emphasized that Wesson’s trial plan did not address how the parties might litigate Staples’s affirmative defense, and noted its prior findings, in denying class certification, regarding the great variation in how Staples general managers' performed their jobs and the extent to which they perform non-managerial tasks. The trial court found no evidence that Staples’s defense could be litigated through common proof. 

The Court of Appeal affirmed the right of trial courts to manage proceedings under their inherent authority. (Slip op. at 25.) Indeed, the Court noted that “PAGA claims may well present more significant manageability concerns than those involved in class actions.  By its terms, PAGA includes no general requirement similar to the requirement in the class action context, that the plaintiff establish a well-defined community of interest, encompassing a showing that common questions predominate over individual ones.” (Id. at 30.) In addition, the Court noted that although “a defendant is not categorically entitled, in every case, to litigate an affirmative defense individually as to each class member, . . .  defendants must have a fair opportunity to litigate their affirmative defenses in some way, even if that entails individualized evidence.”  (Ibid. [Emphasis added.) As such, the Court of Appeal upheld the trial courts determination that there was no way to manageably try the plaintiff’s case. (Slip op. at 47.)

The take-away from Wesson is that defendants should evaluate PAGA claims with an eye towards whether the case is susceptible to common proof. An early motion to strike may be an effective way to bring the court’s attention to inherent manageability problems at the outset of the case. However, as a note of caution, the record in Wesson was well developed as a result of the prior briefing on the motion for class certification. Not all cases will have such a developed record, or otherwise show that individual issues will present manageability issues. In addition, the plaintiff in Wesson offered significantly limited cooperation in developing a trial plan, preferring to argue that no such requirement existed. The plaintiffs’ bar is likely to adapt their methods to attempt to avoid the same result.

While this is welcome news for California employers, we expect the plaintiff will likely petition the California Supreme Court to review the decision. Employers are recommended to keep a close eye on this evolving issue and should be ready to consult with their employment attorney for the latest recommendations.

Employment Law

Mollie M. Burks
Sat Sang S. Khalsa
Don Willenburg

Employment Law