California Employees Who Bring Labor Claims Can’t Recover for Their Unpaid Wages

The California Supreme Court has ruled that plaintiffs in Private Attorney General Act cases cannot recover for their own or their fellow employees’ unpaid wages, but are limited to recovering civil penalties set forth in the California Labor Code.

The PAGA statute was enacted in 2004. It authorizes employees to file lawsuits to recover civil penalties on behalf of themselves, other employees and the state of for labor code violations. An employee who brings a PAGA claim is entitled to keep as much as 25% of the recovery, while the state keeps 75%.

Several cases have been brought under the California law, which gives employees the right to step into the shoes of the state labor secretary to bring enforcement actions. Gig economy companies like Uber have faced several such suits, including one ruling two years ago in which a Los Angeles state judge approved a $7.75 million deal offering 1.6 million California drivers an average of $1.08 each to resolve one of several U.S. lawsuits challenging the ride-hailing giant’s contractor-based business model.

The decision in Z.B., N.A. et al. v. Superior Court (Lawson) imposes a significant limitation on the scope and damages available in such claims, the website JD Supra is reporting.

In Lawson, the employer Zions Bancorp sought to compel arbitration of the unpaid wages portion of the recovery. The Court agreed, and found that back wages are not only subject to arbitration but are unrecoverable in a PAGA case to begin with, ruling that back wages constitute “compensatory damages” paid to the individual employees, not civil penalties payable to the state of California.

Based upon the court’s ruling, while employees may pursue their individual wage claims in a civil action, they cannot recover unpaid wages through the PAGA statute, according to JD Supra.