Exhaustion Matters – Don’t Try Going It Alone Under PAGA

A recent decision by the California Court of Appeal provides two important reminders for practitioners handling Private Attorneys General Act (“PAGA”) claims. First, exhausting administrative proceedings matters. Second, PAGA claims are representative claims – not individual actions.

Under PAGA, an “aggrieved employee” may file a representative action on behalf of himself or herself and other current and former employees to recover civil penalties for violations of the California Labor Code.

Before bringing suit, PAGA plaintiffs must exhaust administrative remedies by giving the Labor and Workforce Development Agency (“LWDA”) notice of the specific Labor Code provisions allegedly violated and the facts and theories supporting the claim. If the LWDA decides not to investigate, the plaintiff can move forward in court.

In Khan v. Dunn-Edwards Corp., 19 Cal. App. 5th 804 (2018), the plaintiff sued for receiving his final paycheck 11 days after his termination in violation of Labor Code sections 201–203. He purported to sue on behalf of himself and others similarly situated and alleged that he could certify his case as a class action. While the lawsuit was pending, the plaintiff submitted a notice to the LWDA that included waiting-time and Labor Code § 226(a) claims. Importantly, the plaintiff wrote “This correspondence shall constitute written notice under Labor Code § 2699.3 of my claims against my former employer….” He also did not reference any other current or former employee in his LWDA submission.

After the trial court compelled his individual claims to arbitration, the plaintiff dismissed those claims and filed a First Amended Complaint asserting a single PAGA claim. Dunn-Edwards moved for summary judgment, arguing in part that the plaintiff had failed to exhaust under PAGA because his LWDA submission only described violations he allegedly suffered. Both the trial court and the appellate court agreed.

The courts rejected the plaintiff’s arguments that (1) the notice did not need to specify that he was bringing claims on behalf of aggrieved employees because was a proxy for the state and (2) the notice should be assumed to being brought on a representative capacity. The Court of Appeal held that because the LWDA notice only applied to the plaintiff, the LWDA did not have an adequate opportunity to decide whether to investigate. Similarly, Dunn-Edwards had no adequate opportunity to respond to the agency, because the notice suggested only an individual violation. The Court also noted that a PAGA action is only a representative action. One cannot recover individual penalties.

This case is a good reminder that LWDA exhaustion is mandatory and it matters. Practitioners would be well advised to scrutinize LWDA submissions to ensure that they provide adequate notice of the claims being asserted. The case also confirms that while the nature of PAGA actions is still evolving, a PAGA claim is not an individual claim.