PAGA Strikes Again: The Statute of Limitations Does Not Apply to Representative Plaintiff

In Johnson v. Maxim Healthcare Services, Inc. (“Johnson”), the California Court of Appeal, Fourth District, Division One (San Diego) held that an employee, whose individual claim is time-barred, may still pursue a representative claim under PAGA. Therefore, any aggrieved employee can bring a PAGA action at any time, regardless of when the employee was personally aggrieved.

Plaintiff, an hourly non-exempt employee, filed a lawsuit against her employer, Maxim Healthcare Services, Inc. (Maxim), under the Private Attorney General Act of 2004 (PAGA). (Lab. Code, § 2698, et seq.).  Specifically, Plaintiff alleges that on September 7, 2016, she signed an agreement in connection with her employment that included a non-competition clause, which is prohibited under California law. Plaintiff filed her complaint on September 9, 2019, more than three years after she signed the agreement. Maxim demurred to the complaint arguing that Johnson’s individual claim was time-barred because she signed the Agreement three years before she filed suit. The superior court sustained Maxim’s demurrer to complaint, finding that Plaintiff’s individual claim was time-barred.  The court subsequently dismissed the action with prejudice.

The Court of Appeal noted that a PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties because an employee suing under PAGA “does so as the proxy or agent of the state’s labor law enforcement agencies.” However, only an aggrieved employee has standing under PAGA. Accordingly, the main issue addressed on appeal was whether an employee, whose individual claim is time-barred, may still pursue a representative claim under PAGA. The Court of Appeal held the answer is yes. In reaching its conclusion, the Court of Appeal relied on Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73 (Kim), where the Supreme Court concluded an employee who settles and dismisses individual Labor Code claims does not lose standing to pursue a PAGA claim. The Supreme Court in Kim also observed PAGA standing is not “inextricably linked to the plaintiff’s own injury and PAGA standing does not depend on maintaining an individual Labor Code claim.”

Thus, in using this same rationale expressed by the Supreme Court in Kim, the Court of Appeal concluded Plaintiff is an “aggrieved employee” with standing to pursue her PAGA claim. The fact that Plaintiff’s individual claim may be time-barred does not nullify the alleged Labor Code violations nor strip Plaintiff of her standing to pursue PAGA remedies. Specifically, the court held the fact that Plaintiff’s claim is time-barred places her in a similar situation as a plaintiff who settles her individual claims or dismisses her individual claims to pursue a stand-alone PAGA claim. Therefore, the Court of Appeal reversed the trial court’s order sustaining Maxim’s demurrer.

This decision is another reminder that  employers should frequently review its company agreements, onboarding documents, and wage and hour policies to ensure they are California compliant. When an employer receives an employee’s notice to the Labor & Workforce Development Agency, the employer should request assistance from counsel in order to consider all possible procedural and substantive PAGA defenses.

This document is intended to provide you with information about employment & labor law related developments. The contents of this document are not intended to provide specific legal advice. If you have questions about the contents of this alert, please contact the authors. This communication may be considered advertising in some jurisdictions.

July 23, 2021