Hunton Employment & Labor Perspectives

On August 29, 2023, the California Court of Appeal issued a new opinion that, once again, changes how parties litigate and settle claims brought under California’s Private Attorneys’ General Act (“PAGA”).  See Robert Lacour v. Marshalls of California, LLC, et al., 94 Cal.App.5th 1172, 313 Cal.Rptr.3d 77.

In Lacour, the Court examined the overlap between two separate lawsuits brought under California’s Private Attorneys General Act (“PAGA”) by different representative plaintiffs against the same defendant.  Specifically, the Court addressed whether or not a settlement and release in the first PAGA case barred the second representative plaintiff’s PAGA claim against the same defendant.  The Court found that, under the facts, it did not.

The case arose after a trial court dismissed the second PAGA complaint based on a court-approved settlement in the first case, finding that the second case was barred by the doctrine of claim preclusion.  In the settlement in the first case, the parties negotiated a broad release of all Labor Code violations, including claims under PAGA.  In the second lawsuit, the new plaintiff asserted PAGA claims that seemingly fell within the scope of that settlement and release.  Citing to the court-approved settlement and release, the trial court dismissed the complaint in the second lawsuit and entered judgment for the defendant.

The Court of Appeal reversed.  In doing so, the Court noted that the scope of the original settlement, exceeded the allegations in the Plaintiff’s pre-suit notice letter to the Labor and Workforce Development Agency (“LWDA”) – a statutory prerequisite to filing a PAGA complaint in Court.  Whereas the settlement was intended to resolve all claims under the Labor Code, the Court noted that the original plaintiff’s LWDA notice letter was limited to alleged off-the-clock work at the end of shifts.  The second plaintiff’s PAGA claim, by contrast, dealt with alleged failure to reimburse uniform maintenance and other expenses, such as the costs of using personal phones and vehicles for work purposes, in addition to other kinds of claimed Labor Code violations no encompassed in the first plaintiff’s original notice.

The Court of Appeal stated that the preclusive effect of the original settlement was not determined by the scope of the release, but by the scope of the allegations in the LWDA notice.  In other words, the settling plaintiff did not have authority to release any claims beyond what was in the notice (and, thus, what the plaintiff was authorized to litigate and settle by the LWDA).  As such, the preclusive effect of the settlement was much narrower than was anticipated by the broad release in the settlement agreement.

The case is a useful reminder that a Plaintiff’s PAGA notice letter to the LWDA controls the scope of a lawsuit brought under PAGA and, ultimately, any settlement that is reached.  With the assistance of counsel, parties seeking to resolve claims brought under PAGA must make sure that all factual claims that they intend to include in a PAGA settlement are first laid out in the plaintiff’s notice letter to the LWDA.