Not So Fast: Trial Courts Finding PAGA’s Statute of Limitations Is Still Alive and Well After Johnson v. Maxim Healthcare

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Earlier this year, the California Court of Appeal ruled that a plaintiff was permitted to pursue a PAGA claim for alleged violations of Labor Code Section 432.5, even though the statute of limitations on her individual claim had run. Johnson v. Maxim Healthcare Servs., Inc., 281 Cal. Rptr. 3d 478, 481 (Cal. Ct. App. 2021). In Johnson, the plaintiff alleged that Maxim violated the statute by requiring her and other employees to sign unenforceable noncompetition agreements. Id. at 480. Maxim demurred on the grounds that Johnson was not an aggrieved employee because she signed the agreement more than three years before filing the complaint, and therefore her claim was time-barred. Id. After the trial court sustained the demurrer, the Court of Appeal reversed. Relying on California Supreme Court precedent that a PAGA plaintiff’s standing does not depend on having standing to bring an individual claim, the court held that Johnson had standing because she alleged that “she personally suffered at least one Labor Code violation on which the PAGA claim is based,” and “[t]he fact that Johnson’s individual claim may be time-barred does not nullify the alleged Labor Code violations[.]” Id. at 482 (citing Kim v. Reins Int’l Cal., Inc., 9 Cal. 5th 73, 80, 84 (2020)).

The wage and hour bar took notice because the Johnson decision arguably has profound implications for PAGA’s one-year statute of limitations. Under one interpretation, the statute of limitations merely defines the liability period, but otherwise places no temporal restriction on who may pursue a PAGA claim. Under this interpretation, an employer could potentially face a PAGA lawsuit from a former employee who allegedly experienced Labor Code violations decades ago.

However, certain details of Johnson point to a much narrower holding: namely, that to have PAGA standing, a plaintiff must have been “aggrieved” by the alleged violation during the one-year limitations period, even if they no longer have standing to bring an individual claim. Notably, the court pointed out that “Johnson remains an employee of Maxim and continues to be governed by the terms of the [allegedly unlawful] Agreement.” Id. at 484. This fact was critical in distinguishing the case from Robinson v. S. Counties Oil Co., 53 Cal. App. 5th 476 (2020), where the Court of Appeal had held that a PAGA plaintiff had no standing to pursue penalties because he was not employed during the alleged liability period. Id. at 483-84.

Two recent trial court decisions on point follow the latter interpretation. In Ambuehl v. Collins, Los Angeles Super. Ct. Case No. 20STCV13565 (Sept. 17, 2021), the court sustained the cross-defendants’ demurrer, finding that a PAGA claim that sought penalties for violations that allegedly occurred years after the cross-plaintiff’s employment was time-barred. As the court explained, “Johnson is distinguishable from the instant action, since the plaintiff in Johnson was still employed by the defendant employer during the statutory period when the alleged violations against other aggrieved employees occurred (notwithstanding the fact her [individual] claim was time-barred)[.]” Slip op. at 5.

The same conclusion was reached in Green v. Von Dutch, LLC, Riverside Super. Ct. Case No. CVRI2101925 (Aug. 23, 2021). The court sustained a demurrer on statute of limitations grounds because the plaintiffs stopped working for the defendant before the limitations period on their PAGA claims. As in Ambuehl, the court explained that “Johnson is distinguishable and the Court of Appeal specifically discussed that the plaintiff there remained an employee and continued to be governed by the agreement.” Slip op. at 3 (original emphasis).

In sum, the narrow interpretation of Johnson appears to be correct, and early returns suggest that trial courts agree. Employers can probably rest assured that even after Johnson, a PAGA plaintiff must be aggrieved within the one-year limitations period in order to pursue a claim.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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