On January 18, 2024, the California Supreme Court issued its much-anticipated decision in Estrada v. Royalty Carpet Mills, Inc., to resolve a split in authority as to whether trial courts have inherent authority to strike California Private Attorneys General Act (PAGA) claims on manageability grounds.

PAGA allows a single aggrieved employee to bring a claim seeking penalties for violations of the Labor Code on behalf of themselves and all aggrieved employees. Notably, a PAGA plaintiff may seek to recover penalties based on violations committed against other employees even if they did not personally experience each and every alleged violation, and even if the violations do not stem from a uniform policy. Thus, PAGA representative actions can be extremely complex, and there are often individualized issues relating to whether each employee suffered every alleged violation of the Labor Code. Over the past few years, California courts have taken different approaches to managing PAGA cases: some held that if the representative action was not “manageable” (because of all the individualized issues), then the case could be dismissed; while others held that courts lack authority to dismiss PAGA claims as unmanageable.

The Supreme Court ultimately held that trial courts do not have inherent authority to dismiss PAGA claims due to manageability concerns. While manageability is a requirement in the class action context, the Court concluded it would be inappropriate to impose the manageability requirement on PAGA cases. In reaching its decision, the Court emphasized the structural differences between class actions and PAGA claims and the Legislature’s specific intent behind PAGA to “maximize the enforcement of labor laws.”

The Court did observe that its holding does not preclude trial courts from using existing case management tools to help efficiently adjudicate PAGA cases. The Court pointed out this might include the use of representative testimony, surveys, and statistical analysis and noted that courts may put reasonable limits on the witness testimony and other forms of evidence that may be introduced, which could conceivably limit the scope of the PAGA claim itself. The Court also pointed out that if plaintiffs assert PAGA claims in an overbroad or unspecific manner, such that they could not prove liability as to all or most employees, the claims could theoretically be limited through demurrer or motions for summary judgment. In addition, the Court left open the possibility that other defendants might be able to assert due process challenges in the context of PAGA cases. However, it remains to be seen whether and how trial courts will use these tools to manage large PAGA cases, and California employers will likely continue to see the trend towards an increase in PAGA litigation as this decision makes it easier for an employee to maintain a PAGA representative action than a class action.

If you have questions about how this case, or other recent PAGA-related decisions, could affect your business, please contact us.

• Sanam Khajenoori (skhajenoori@wilsonturnerkosmo.com)
• Katie M. McCray (kmccray@wilsonturnerkosmo.com)

Wilson Turner Kosmo’s Special Alerts are intended to update our valued clients on significant employment law developments as they occur. This should not be considered legal advice.