September 21, 2023

Key California Employment Law Case Summaries: August 2023

LaCour v. Marshalls of California LLC, No. A163920, 2023 WL 5543622 (Cal. Ct. App. Aug. 29, 2023)

Summary:  Emergency Rule 9, which tolled statutes of limitations for six months due to the COVID-19 pandemic, is valid and operates to extend the time to file a civil suit for a PAGA claim as well as the time period to serve the notice letter to the Labor & Workforce Development Agency.

A judicially approved settlement of PAGA claims is limited to the claims or theories actually pled in the notice to the LWDA.

Facts:  On Jan. 4, 2021, Plaintiff Robert LaCour, a former loss prevention specialist at a store operated by Defendant Marshalls of California LLC, filed a standalone action under the California Labor Code Private Attorneys General Act (“PAGA”) based primarily on Defendant’s failure to reimburse uniform maintenance and other expenses. Defendant filed a demurrer, arguing that Plaintiff’s PAGA action was untimely because, his employment having ended in May 2019, the one-year-and-65-day clock had run out prior to Jan. 4, 2021. Defendant also filed a motion to strike, arguing in the alternative that even if Plaintiff’s action was timely filed, all allegations of Labor Code violations pre-dating Nov. 17, 2020 must be stricken because PAGA claims against Defendant through that date were released in the settlement of an earlier class and PAGA action (the “Rodriguez” settlement). In response to the demurrer, Plaintiff argued that under Emergency Rule 9 of the California Rules of Court, which was put into effect by a decision from the Judicial Council on recommendation from the governor during the COVID-19 pandemic, the otherwise applicable limitations period for filing a PAGA claim was extended by six months. In response to the motion to strike, Plaintiff argued that the Rodriguez settlement release was unenforceable because the plaintiff had no authority to settle PAGA claims going beyond the factual basis for her pre-suit notice to the Labor and Workforce Development Agency (“LWDA”). The trial court overruled Defendant’s demurrer, finding that Emergency Rule 9 was valid and tolled the time for Plaintiff to bring his PAGA claims. That said, the trial court determined that the Rodriguez settlement was valid, so Plaintiff could only pursue his claims to the extent the alleged Labor Code violations occurred after the effective date of the Rodriguez settlement. Thus, the court granted Defendant’s motion to strike to the extent that Plaintiff sought to pursue PAGA recovery for Labor Code violations prior to Nov. 17, 2020. After this ruling, Defendant filed a motion for judgment on the pleadings, which was granted, arguing that, because Plaintiff was not an employee of Defendant at any time after Nov. 17, 2019, he was not an aggrieved employee within the meaning of the PAGA statute and therefore had no standing to sue. Plaintiff appealed from the judgment, and Defendant cross-appealed arguing its demurrer was erroneously overruled because Emergency Rule 9 was “unconstitutional and prohibited by statute.”

Court’s Decision:  The California Court of Appeal vacated the judgment and remanded. The court first found that Emergency Order 9 was valid both statutorily and constitutionally.  Statutorily, the text of Government Code Section 8571 (which empowered the governor’s Executive Order that precipitated Emergency Order 9) permits the temporary suspension of statutes governing “procedure for the conduct of state business.” And because the business of courts is necessarily state business, the governor’s emergency power to suspend statutes extends to rules of court procedure. Constitutionally, the court of appeal had “no trouble” finding that the governor acted within reason by allowing the Judicial Council to extend statutes of limitations for a period. As to the claimed preclusive effect of the Rodriguez settlement, the court of appeal determined that the Rodriguez settlement exceeded the scope of what the Plaintiff had been authorized to pursue on behalf of the LWDA. The court reasoned that where a PAGA claimant agreed to entry of judgment resolving a variety of claims for which he or she provided no factual basis to the LWDA, and thus failed to give the LWDA an opportunity to investigate, the prior judgment will not extinguish unlisted PAGA claims brought in later PAGA cases by claimants actually authorized to pursue such claims. The court also concluded that an LWDA statutory proxy cannot be held to be in privity with his or her principal when he or she acts without authority and exceeds the scope of the notice given to the LWDA. The court explained that Plaintiff and other PAGA claimants could not have had reasonable notice that they would be bound as non-party privies or that their interests would be protected by a settlement in Rodriguez because the Rodriguez plaintiff gave no such indication in her LWDA notice.

Practical Implications:  This case is an important reminder to be careful when settling PAGA claims. It can be easy to lose sight of the initial notice sent to the LWDA and to focus on settling the claims that have developed over the course of litigation. But it is critical that any PAGA claim being settled be one that was identified in the original LWDA letter or an amended letter submitted as part of the settlement.

Raines v. U.S. Healthworks Medical Group, No. S273630, 2023 WL 5341067 (Cal. Aug. 21, 2023)

Summary:  FEHA, which defines “employer” to include “any person acting as an agent of an employer,” permits a business entity acting as an agent of an employer to be held directly liable as an employer for employment discrimination in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer.

Facts:  Plaintiffs Kristina Raines and Darrick Figg, two applicants for employment, brought a putative class action against Defendant U.S. Healthworks Medical Group, an agent of their prospective employers, for employment discrimination related to a pre-employment medical screening conducted by Defendant. Plaintiffs alleged various violations of the California Fair Employment and Housing Act (“FEHA”), and Defendant moved to dismiss. The trial court dismissed Plaintiffs’ FEHA claims, concluding that FEHA does not impose liability on the agents of a plaintiff’s employer. Plaintiffs appealed. The Court of Appeals for the Ninth Circuit certified the following question to the California Supreme Court: “Does California’s Fair Employment and Housing Act, which defines ‘employer’ to include ‘any person acting as an agent of an employer,’ . . . permit a business entity acting as an agent of an employer to be held directly liable for employment discrimination?”

Court’s Decision:  The California Supreme Court held that FEHA permits a business entity acting as an agent to be held directly liable for employment discrimination where the agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer. The court examined the language of the statute, public policy, and analogous cases to conclude that FEHA “permits business-entity agents to be held directly liable for FEHA violations in appropriate circumstances.” The court found that business entity agents that are alleged to be large enterprises with more than five employees are more likely to have comparable bargaining power to the employer and are less in need of protections against liability than individual agents. 

Practical Implications:  This case significantly expands the scope of FEHA. Employers must exercise additional caution when delegating employment-related responsibilities, like pre-employment medical screening or background checks, to third parties.