California Supreme Court Decision Reshapes Defense Strategies in PAGA Claims

In a landmark ruling, the California Supreme Court has significantly altered the landscape for employers facing Private Attorney General Act (PAGA) claims. The court’s decision in Estrada v. Royalty Carpet Mills, Inc. has effectively removed a previously utilized defense mechanism, challenging the manageability of PAGA claims. This shift comes against the backdrop of the 2004 enactment of PAGA, which has since been a thorny issue for California employers, allowing employees to file representative actions for Labor Code violations without the procedural safeguards required in class actions. This ease of filing has led to a surge in PAGA claims, placing considerable strain on employers and the judicial system alike.

Historically, there was a split among lower courts regarding their ability to dismiss unmanageable PAGA claims, with some courts asserting such authority as a means to preserve judicial economy, while others argued it undermined PAGA’s purpose. The Supreme Court’s ruling now clarifies that trial courts do not have the inherent authority to dismiss PAGA claims based on manageability concerns. However, it also underscores that defendants’ due process rights remain intact, outlining several strategies employers can utilize to defend against these claims.

Employers are encouraged to focus on affirmative defenses, challenge the plaintiff’s case directly, scrutinize the plaintiff’s standing and notice before suit, and present evidence that could mitigate damages. The court also highlighted the importance of controlling the scope of evidence through limiting witness testimony, managing discovery, and employing statistical analysis carefully. This ruling necessitates that employers work closely with legal counsel to adapt their defense strategies, ensuring they navigate the complexities of PAGA claims effectively while safeguarding their rights to due process.