Contributors

Jasmin B. Bhandari

Principal

Usually, court cases under PAGA (the Private Attorneys General Act) strike fear in the hearts of employers given how quickly the penalties can rack up. PAGA is the statute that allows a single employee to stand in the place of the attorney general and file suit on the behalf of others to recover penalties for alleged Labor Code violations. The fate of PAGA appears to be in the hands of California voters in 2024 since there is a ballot initiative to see if voters will repeal and replace PAGA with the Fair Pay and Employer Accountability Act. The FPEAA would largely remove the “Bounty Hunter” aspect of PAGA.

Meanwhile, while PAGA is still alive and well, a trial court in Alameda County gave a win to employers: entering an order allowing Hobby Lobby Stores, Inc. to recover $125,000 in costs from the Labor and Workforce Development Agency (LWDA). Hobby Lobby successfully fought a PAGA lawsuit for six years, culminating in all these costs. The suit alleged a failure to provide suitable seating for employees, but Hobby Lobby argued that seats would create a risk of injury. With judgment entered in Hobby Lobby’s favor, CCP 1032 normally provides prevailing parties to recover their costs (not attorney’s fees, unless specifically authorized by statute). But Plaintiff argued this would have a “chilling effect” on PAGA litigation if a single employee who lost the case would be liable for costs.

So, Hobby Lobby looked to the LWDA, arguing it is the “real party in interest.” The evidence showed the LWDA had received about $375 million in civil penalties from PAGA lawsuits, in just the last three fiscal years. Plus, if the LWDA directly enforced the Labor Code by filing an action and the employer won, the LWDA would be liable for the costs. Accordingly, the trial court awarded costs to the employer, to be paid by the LWDA.