In Urbino v. Orkin Servs. of California, Inc., No. 11-56944, published August 13, 2013 (Urbino), the Court of Appeals for the Ninth Circuit held federal courts lack subject matter jurisdiction over a wage and hour lawsuit brought under California’s Private Attorneys General Act of 2004 (PAGA). Specifically, the court concluded that, while a named plaintiff may assert claims on behalf of other similarly situated employees under PAGA, the claims cannot be aggregated for purposes of the minimum amount in controversy requirement for diversity jurisdiction.
The plaintiff in Urbino alleged the defendant employer deprived Urbino and other non-exempt employees of meal periods, overtime and vacation wages, and accurate itemized wage statements. PAGA authorizes an aggrieved employee to commence a civil action for penalties against an employer on behalf of himself or herself and other current or former employees. The plaintiff’s individual claims gave rise to potential penalties in the amount of $11,602.40. However, the aggregate claims of the 811 other employees exceeded $400,000.
After the case was removed by the employer to federal court, plaintiff moved to remand to state court for failure to meet the minimum amount in controversy threshold for diversity jurisdiction. Acknowledging a divergence of opinion among the district courts, the district judge concluded plaintiff’s PAGA claims could be aggregated. The Ninth Circuit reversed, reasoning that breaches of California’s Labor Code by an employer implicate individual rights rather than a “common and undivided” right. It further concluded that while the plaintiff’s PAGA claims primarily benefit the state, the state is not a “citizen” for purposes of diversity jurisdiction. As such, the Ninth Circuit remanded the case to state court.
Employers may choose to remove lawsuits to federal court for strategic reasons. However, this forum is only available where the court has subject matter jurisdiction. Urbino is an unwelcome decision for employers who prefer to litigate employment claims in a federal forum. This decision significantly limits the scope of federal diversity jurisdiction over wage and hour lawsuits brought under PAGA.
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