Maxim Healthcare Services hired Gina Johnson as an hourly, nonexempt employee in 2016. She signed a documented titled “Non-Solicitation, Non-Disclosure and Non-Competition Agreement.” In June 2019, Johnson sent notice to the California Labor and Workforce Development Agency that the agreement included a prohibited noncompetition clause and that she intended to pursue a representative action on behalf of all employees who signed the agreement. She then filed a complaint in California state court alleging a single cause of action for representative claims for penalties under PAGA.
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 trial court agreed and sustained the demurrer without leave to amend, holding that because Johnson’s claim was time-barred, she could not pursue a PAGA claim in a representative capacity.
An appellate panel reversed.
The court emphasized that PAGA claims are legally and conceptually different from an employee’s own suit for damages and statutory penalties. Not every private citizen in California can serve as the state’s representative, as only an “aggrieved employee” has standing under PAGA.
An aggrieved employee is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed,” the court noted.
Did Johnson meet the definition of an aggrieved employee even though her individual claim was time-barred? Yes, the court said, relying on the California Supreme Court’s 2020 decision in Kim v. Reins International California, Inc.
In that case, the state’s highest court concluded that an employee who settles and dismisses individual Labor Code claims does not lose standing to pursue a PAGA claim, because the statute has two requirements: that the plaintiff was employed by the alleged violator and that one or more of the alleged violations was committed against him or her.
“As [the California Supreme Court] explained, the ‘Legislature defined PAGA standing in terms of violations, not injury,’ and the employee became ‘aggrieved’ when ‘one or more Labor Code violations were committed against him. Settlement did not nullify these violations.’ The court also observed PAGA standing is not ‘inextricably linked to the plaintiff’s own injury. Employees who were subject to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation.’”
Nor does PAGA standing depend on maintaining an individual Labor Code claim, the court noted. “Under Kim, we conclude Johnson is an ‘aggrieved employee’ with standing to pursue her PAGA claim,” the court wrote. “Johnson alleged she is employed by Maxim and that she personally suffered at least one Labor Code violation on which the PAGA claim is based. The fact that Johnson’s individual claim may be time-barred does not nullify the alleged Labor Code violations nor strip Johnson of her standing to pursue PAGA penalties. In this sense, we find the fact that Johnson’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.”
The appellate panel was not persuaded by Maxim’s efforts to distinguish Kim. Johnson’s allegation that she was an aggrieved employee was sufficient at this stage of litigation to establish standing, and Kim is not limited to situations in which a plaintiff settles the underlying Labor Code claims, the court said.
Because the court found Johnson had standing to bring the subject PAGA claim, the dismissal was reversed.
To read the decision in Johnson v. Maxim Healthcare Services, Inc., click here.
Why it matters: The decision is a cautionary tale for California employers, as the court held that employees can bring PAGA claims even if their individual claims against their employers are time-barred.