PAGA Takeaways from the California Supreme Court’s Decision in Kim v. Reins
On March 12, 2020, the California Supreme Court issued its opinion in Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, adopting an expansive approach to standing under the California Private Attorneys General Act of 2004 (Labor Code § 2698 et seq., “PAGA”).
Most importantly, the Court held that an employee who settles and dismisses individual Labor Code claims may still maintain standing to pursue a representative PAGA action for civil penalties as an “aggrieved employee.”
PAGA Basics: What It Is and How It Works
California enacted PAGA to improve compliance with Labor Code requirements by allowing “aggrieved employees” to seek civil penalties on behalf of the State when enforcement resources are limited. See Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348; Lab. Code § 2699(a).
Who is an “aggrieved employee” under PAGA?
PAGA defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” (Lab. Code § 2699(c).)
How PAGA differs from a class action
A PAGA representative action is an enforcement action between the State (through the LWDA) and the employer, with the employee acting as the State’s authorized representative. (See Kim, 9 Cal.5th at p. 86; Iskanian, 59 Cal.4th at pp. 382–384.)
How PAGA penalties are distributed
Of civil penalties recovered in a PAGA action, 75% goes to the LWDA and 25% is distributed to aggrieved employees. (Lab. Code § 2699(i).)
Kim v. Reins: Key Facts and Procedural History
Justin Kim, a restaurant training manager, sued Reins International California, Inc., alleging training managers were misclassified as exempt employees. His case asserted Labor Code claims (including wages/overtime, meal and rest breaks, wage statements, and waiting time penalties), as well as a representative PAGA claim based on many of the same alleged violations.
Reins compelled arbitration of Kim’s individual claims and obtained dismissal of class claims based on an arbitration agreement and class waiver. While arbitration was pending, Reins made a Code of Civil Procedure § 998 offer to settle Kim’s individual claims (with a carve-out for the PAGA claim). Kim accepted, dismissed his individual claims, and left the PAGA claim pending.
Reins then argued Kim lost standing to pursue PAGA because he had settled and dismissed the individual Labor Code claims. The trial court agreed; the Court of Appeal affirmed; and the California Supreme Court granted review.
The Supreme Court’s Holding on PAGA Standing
The Supreme Court addressed whether an employee loses standing to pursue PAGA after settling and dismissing individual Labor Code claims. The Court unanimously held no: settlement of individual claims does not strip an aggrieved employee of standing to pursue PAGA penalties as the State’s authorized representative.
The Court emphasized that the Legislature defined PAGA standing in terms of violations, not “injury.” Put differently, settlement may resolve an individual’s damages, but it does not “nullify the violations that occurred.”
Key Takeaways for PAGA Plaintiffs
Takeaway: Settling Individual Claims Does Not Eliminate PAGA Standing
An employer generally cannot extinguish a representative PAGA action by “picking off” an employee’s individual claims through settlement. The Court expressed concern that employers could use devices like CCP § 998 offers to avoid representative liability—undermining PAGA’s enforcement purpose.
Practice note: Employees should pay close attention to settlement language. A settlement that explicitly releases a PAGA claim may raise different issues than a settlement releasing only underlying individual claims.
Takeaway: Standing Covers Penalties for Other Labor Code Violations
The Court confirmed that an employee subjected to at least one Labor Code violation may serve as a PAGA representative even if they did not personally experience every alleged violation. This aligns with the statutory definition (“one or more” violations) and supports broad enforcement.
Takeaway: Meal/Rest Break Premium Payments May Not Avoid PAGA Penalties
Employers sometimes argue that paying meal/rest break premiums (Lab. Code § 226.7) cures violations and avoids PAGA penalties. The Court clarified that paying the statutory remedy does not excuse the violation itself; a violation can still support PAGA penalties, separate from the premium payment.
Takeaway: Wage Statement Penalties Without Proving “Injury”
For individual wage statement claims, “injury” can be a significant hurdle. In the PAGA context, appellate courts had held that “injury” is not required to recover civil penalties for wage statement violations. The Supreme Court’s reasoning reinforced that inability to obtain individual relief is not necessarily fatal to maintaining a PAGA claim for penalties.
Bottom Line
Kim v. Reins strengthens PAGA as an enforcement mechanism for Labor Code compliance. By confirming broad representative standing, the decision limits strategies aimed at eliminating PAGA exposure through individual settlements and supports vigorous enforcement on behalf of the State.
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Tagore Subramaniam was a Senior Attorney at Matern Law Group, PC. His practice focused on obtaining relief for victims of workplace harassment, discrimination, retaliation, and wrongful termination.Julia Wells is an Associate Attorney at Matern Law Group, PC and a cum laude graduate of the University of Wisconsin Law School. Ms. Wells’s practice focuses on representing employees in all aspects of employment litigation.