California Supreme Court Rules PAGA Plaintiffs Are Presumptively Entitled to Contact Information of Defendant’s Employees Statewide
Last week in a unanimous decision, the California Supreme Court ruled that representative plaintiffs in Private Attorneys General Act (PAGA) cases are presumptively entitled to discover the names and contact information of other allegedly “aggrieved employees” statewide at the outset of litigation, without the need to show good cause.
Enacted in 2004, PAGA allows allegedly “aggrieved employees” to sue employers on behalf of the state of California to recover civil penalties on behalf of the state for violations of the state Labor Code, and to keep for themselves and other aggrieved employees 25 percent of any civil penalties recovered, with the remaining 75 percent going to the state. PAGA also provides for the recovery of attorneys’ fees.
Michael Williams was employed by Marshalls of CA, LLC, at the company’s store in Costa Mesa, California. He sued Marshalls under PAGA, asserting various wage and hour violations. Early in the case, Williams sought to discover the names and contact information of fellow Marshalls employees throughout California, and offered to use a so-called “Belaire-West notice,” a discovery mechanism whereby non-party employees are notified of a plaintiff’s request to discover their names and contact information, and are given an opportunity to opt out of having their information produced. Marshalls objected on several grounds, including burdensomeness and the privacy rights of its employees. The trial court granted Williams’ motion to compel Marshalls to produce employee contact information, but only as to employees who worked at the Costa Mesa store where Williams worked.
The Court of Appeal affirmed, holding discovery of contact information for employees statewide was premature, and that Williams had failed to show good cause for the production of contact information statewide, given that he had not shown knowledge of unlawful practices at any store other than the Costa Mesa location, or facts putting any uniform statewide practice at issue.
The California Supreme Court reversed, finding the trial court abused its discretion in denying Williams’ motion to discover statewide contact information because the California Code of Civil Procedure does not include a “good cause” standard for discovery, and discovery rules for PAGA actions are no different from the rules governing discovery in putative class actions. Although defendants may object to discovery requests on various grounds (as did Marshalls) and trial courts retain broad discretion to manage discovery, when it opposed the motion the company presented no evidence showing the production of statewide contact information would be unduly burdensome, and the well-established Belaire-West notice procedure provided sufficient privacy protections.
This decision confirms that in a class, collective or PAGA action litigated in a California state court, the names and contact information of non-party employees are presumptively discoverable simply upon the filing of a complaint. Instead of placing the burden on plaintiffs to show good cause for the discovery, the burden is on defendants to show why discovery should be limited. The court found Marshalls failed to do so, but the opinion leaves open the possibility that other employers may be able to limit discovery under the right circumstances.
Ninth Circuit Adopts California Supreme Court’s Iskanian Rule Prohibiting Enforcement of PAGA Waivers
Last week the Ninth Circuit Court of Appeals held that waivers of the right to bring representative actions under the California Labor Code Private Attorneys General Act of 2004 (PAGA) are unenforceable, essentially adopting the rule established in June 2014 by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC. Prior to the Ninth Circuit’s decision, district courts in California had been divided on the issue, but most district courts deciding the issue had rejected the Iskanian rule.
The Ninth Circuit’s decision was in Sakkab v. Luxottica Retail North America, Inc., No. 13-55184 (9th Cir. Sep. 28, 2015). In that case, Shukri Sakkab filed a putative class action for unpaid overtime and inaccurate wage statements against his former employer, Luxottica Retail North America, Inc. After Luxottica answered and removed the case to federal court, Sakkab filed an amended complaint adding a representative claim for civil penalties under the PAGA. Luxottica then filed a motion to compel arbitration under the dispute resolution agreement contained in its Retail Associate Guide. The agreement purported to prohibit Sakkab from filing or participating in any “class-based” lawsuit or arbitration, “including any collective action” or “collective arbitration.” The district court granted the motion, holding Sakkab had waived his right to bring a class action or representative PAGA action, and ordering him to arbitrate his individual claims.
After the district court granted Luxottica’s motion and entered judgment, the California Supreme Court issued its Iskanian decision, ruling that PAGA waivers are unenforceable under California law.
On appeal, Luxottica argued the Federal Arbitration Act (FAA) preempts the Iskanian rule. In a 2-1 decision, the Ninth Circuit panel rejected the preemption argument. In reaching its decision, the panel majority explained that the Iskanian rule is a generally applicable contract defense that is not limited to arbitration agreements, and therefore falls within the FAA’s savings clause, which preserves generally applicable contract defenses providing they do not conflict with the FAA’s purposes. Next, the majority determined the rule does not conflict with the FAA’s purposes of (1) overcoming judicial hostility to arbitration and (2) ensuring enforcement of the terms of arbitration agreements, because PAGA claims can be arbitrated, and the Iskanian rule merely prohibits waivers of the right to bring representative PAGA claims in any forum.
In a lengthy dissent, Justice N. Randy Smith stated his view that the FAA does preempt the Iskanian rule, relying on a line of United States Supreme Court cases including AT&T Mobility LLC v. Concepcion, in which the nation’s high court held that class and representative action waivers in consumer contracts were enforceable, reversing a previous Ninth Circuit decision to the contrary.
For the time being, PAGA representative action waivers are not enforceable in either the state or federal district courts in California. But the issue isn’t entirely settled. Luxottica may seek en banc review in the Ninth Circuit, or seek review by the United States Supreme Court. In the meantime, employers should review their arbitration agreements with counsel and make adjustments if necessary.
Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA