A Los Angeles Superior Court has recently issued conditional approval for a $7.5 million settlement agreement for three overlapping actions under the Private Attorneys General Act (PAGA).

This consolidated settlement will quite possibly amount to the largest that has occurred since the California Court of Appeal defined standards for reviewing a PAGA settlement in a recent case.

This newest decision is particularly noteworthy, however, for providing a summary of the many reasons for which the PAGA plaintiff’s realistic recovery may be significantly less than the potential maximum exposure. The plaintiffs in this settlement had estimated a possible exposure of greater than $104 million; however, in the court’s view, this $7.5 million settlement appears “fair” and “reasonable” considering the risks and realistic recovery faced in pursuing a PAGA claim.

The first reason was that the maximum exposure, in this case, presumed that multiple PAGA penalties could be awarded to aggrieved employees for one violation, a concept referred to as stacking. However, the defendant pointed to a lack of any case history authorizing stacking.

The second reason is that for maximum exposure, it was assumed that “subsequent” violations meant that heightened penalties could be awarded. However, as has been held in several previous cases, these penalties are not available unless an employer has previously been cited for such a violation by the Labor Commissioner.

For the third point, the court noted that unless claims are susceptible to common proof, a plaintiff would need to prove every violation for all individuals and periods in which recovery is sought. This creates significant practical issues for many cases as a considerable number of employees may need to testify in order to prove every violation.

The fourth reason is that the theory of liability that an employee presents may not be possible to prove in a manageable trial. Should the court choose, it may limit or strike claims that are unmanageable such as those that are only capable of being proven by an intensive analysis of every employee.

The fifth and last reason is that even should a plaintiff prevail in proving liability, a court is permitted discretion in awarding any value of penalty up to the maximum allowable amount. This means that in cases where an employer had acted in good faith, the award may be far lower than the maximum exposure.

Employer Takeaways

Even now, it remains extremely difficult to value PAGA claims in which considerable uncertainty is present at many stages. However, this settlement provides a highly positive guide for examining these uncertainties and explaining why the possible liability may be far lower than it appears on the surface.

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Source: Akin Gump Strauss Hauer & Feld