122 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com Of some concern with respect to the exhaustion requirement was a 2008 Court of Appeal decision holding that PAGA claims added in an amended complaint relate back to the original complaint, if the claims rest on the same misconduct and the same injury.451 But this decision failed to address the exhaustion requirement, and courts since have recognized that the failure to properly notify the LWDA and the employer is fatal to a PAGA claim.452 Judicial discretion to reduce penalties. Courts may exercise discretion to reduce the amount of PAGA penalties if the amount otherwise would be “unjust, arbitrary and oppressive, or confiscatory.”453 In exercising that discretion, courts have considered such factors as the corresponding amount of statutory penalties, the employer’s attempts to comply with the law, the uncertainty of the law, and the employer’s ability to pay.454 Court approval of settlements. The court must “review and approve any settlement” of a PAGA action, regardless of whether the settlement includes an award of penalties.455 Further, a copy of a proposed settlement must be provided to the LWDA when it is submitted to the court.456 Courts have approved PAGA settlements involving payments to the LWDA of less than 0.1% of a common settlement fund.457 But one federal district court rejected a $100 million class action settlement because it allocated only 1%—$1,000,000—to PAGA penalties.458 Exemption for notice, posting, and filing violations. Employees cannot maintain PAGA lawsuits for petty violations such as failures to post notices or file notices, although this exemption does not cover “mandatory payroll or workplace injury reporting.”459 Repeal of job-application provision. Employers no longer must (as was once required by former Labor Code section 431) file a copy of their job application forms with the DLSE. The Legislature thus removed the basis for what would be a particularly annoying “gotcha” PAGA lawsuit. Exemption for unionized construction employers. Legislation effective in 2019 created a PAGA exemption for construction employers whose employees are covered by a collective bargaining agreement.460 Exemption for some unionized janitorial employers. Legislation effective in 2022 created a PAGA exemption for some janitorial employers whose employees are covered by a collective bargaining agreement.461 “The California Fair Pay and Employer Accountability Act” initiative. The California Fair Pay and Employer Accountability Act qualified for the 2024 ballot and, if passed, would do the following: (1) replace PAGA and instead give only the Labor Commissioner the right to issue penalties, including increasing penalties for willful violations, (2) provide 100% of the penalties to employees, and (3) create a Consultation and Publication Unit that employers can utilize for guidance on applying the Labor Code. 5.15.3 Further PAGA peculiarities Employees settling individual Labor Code claims can still pursue PAGA claims for themselves and other aggrieved employees for the same violations. One Court of Appeal decision upheld the dismissal of a PAGA claim when a Labor Code plaintiff, whose individual claims had been directed to arbitration, settled his individual claims and then sought to resume his PAGA claim that had been stayed in court pending the arbitration.462 The Court of Appeal held that the plaintiff, upon settling his individual claims, was no longer an “aggrieved employee” and thus lacked standing to pursue a PAGA claim.463 The California Supreme Court upset this sensible result by granting review of the case464 and then unanimously ruling for the plaintiff. The Supreme Court, focusing on the literal language of PAGA, reasoned that an “aggrieved employee” eligible to pursue a PAGA claim is anyone who has suffered a relevant Labor Code violation, and that a PAGA plaintiff remains “aggrieved” even if he has received individual relief for the violation.465
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