The California Supreme Court has told employers that settling an employee’s Labor Code claim does not prevent the employee form later pursuing a PAGA claim for the same violation. Kim v. Reins Int’l California, Inc., Case No. S246911 (Mar. 12, 2020).
An employer who violates the Labor Code may be sued for damages and for civil penalties payable to the State. The Labor Code Private Attorneys General Act of 2004 authorizes “aggrieved” employees to pursue civil penalties on behalf of the State. If they prevail, they receive 25 percent of the penalties collected, and an award of attorney’s fees.
The Supreme Court has maintained that a PAGA claim is a different creature from an employee’s claim for damages. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014); Arias v. Superior Court, 46 Cal.4th 929 (2009).
In this case, employee Justin Kim filed a lawsuit alleging individual Labor Code claims and PAGA claims. He accepted a statutory offer to settle the individual claims, and then dismissed them. The trial court dismissed the PAGA claims on the ground that Kim lacked standing, because his rights had been completely redressed by the settlement.
The Supreme Court reversed. The remedy for a Labor Code violation is distinct from the fact of the violation itself. Since establishing a violation does not require proof of damages, resolving the damages issue does not undo the violation.
The Supreme Court also rejected the employer’s argument that the PAGA claims were barred by the res judicata effect of dismissing the individual claims, (1) because the settlement agreement expressly carved out the PAGA claims, and (2) because the lawsuit had not been fully and finally resolved.