Litigating California Wage & Hour and Labor Code Class Actions

all, but rather simply to proceed with Labor Code claims. If the case settles, however, the
defendant generally insists that the release cover all claims arising out of the same
underlying facts, including any claims for PAGA penalties. Otherwise, the defendant would
face the risk of another lawsuit on the same issues.
A dispute may arise if a member of the settlement class later seeks to bring his own PAGA
action. The plaintiff will argue that the previous class representative had not exhausted the
administrative remedy under PAGA and thus never had a right to release PAGA claims.
Rather, until that administrative remedy is exhausted, the plaintiff argues, the PAGA claim
is the property of the state. In short, the plaintiff argues that a prerequisite to a release of
PAGA claims is the exhaustion of the administrative remedy and the receipt of notice from
the state that it is opting not to pursue the claim.
The court of appeal addressed this issue in Villacres v. ABM Industries Inc., 259 and held that
the class members could indeed waive their right to pursue PAGA claims and that a
judgment entered on such a class settlement creates a res judicata bar to those class
members pursuing PAGA claims in a separate action. The court explained that the party in
a PAGA action is the aggrieved employee, rejecting the plaintiff’s argument that the State
of California is the real party in interest in a PAGA action.
Separate from the res judicata argument, however, an employer may argue that where the
class release includes language that the class members are releasing PAGA claims based
on the same underlying facts as the Labor Code claims, the doctrine of release precludes
any class member from pursuing PAGA relief. In other words, while there is no sort of res
judicata bar, basic contract principles of release prevent someone who agreed to the
release from going ahead and suing on the released claim. This argument was approved
in a federal decision, Waisbein v. UBS Financial Services Inc., 260 which is not binding on
California courts but is persuasive authority. 261 Accordingly, while it remains unsettled
whether PAGA claims can be released other than through a settlement of a class action
that asserted PAGA claims, the law that exists suggests that such settlements are proper.
E. Wage Order Claims
California’s Industrial Welfare Commission sets forth minimum work standards for
California employees in Wage Orders. These Wage Orders contain a variety of provisions
that employers must follow, including everything from overtime and minimum wage
259
260
261
189 Cal. App. 4th 562 (2010).
2007 U.S. Dist. LEXIS 92051, at *8-9 (Dec. 5, 2007) (“[T]he question is whether the Bowman class members voluntarily
entered into an agreement in which they accepted a monetary benefit from UBS in exchange for not pursuing their
claims under PAGA. The indisputable answer to that question is ‘yes.’”)
Harris v. Investor’s Business Daily, Inc., 138 Cal. App. 4th 28, 34 (2006) (“even unpublished federal opinions have
persuasive value in [the superior] court”).
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 61