Wage and Hour Policies Amid Rising PAGA Filings

At Meyers Nave, we prioritize assisting our clients in establishing and maintaining wage and hour policies that comply with legal standards. This includes implementing effective systems and processes to ensure all levels of the workforce are informed and practicing these policies. Unfortunately, we have observed a significant uptick in class action and Private Attorneys General Act (PAGA) lawsuit filings, particularly since the onset of the COVID-19 pandemic.

Last year, California experienced over 5,000 employment-related class-action filings, and the number of PAGA notices filed with the California Labor and Workforce Development Agency has increased annually.

Rising Litigation: Understanding the Causes
Recent rulings from the California Supreme Court have been notably favorable to employee-plaintiffs, subsequently increasing employers’ exposure and liability:

  • Wage Designation: Meal and rest break premiums have been reclassified as “wages,” which has implications for wage statements and final pay penalties.
  • Timekeeping Requirements: Employers must accurately record meal periods and beware of rounding practices and policies. Any discrepancies in time records for meal periods raise a rebuttable presumption of meal period violations.
  • Payment Calculations: Employers are required to pay meal and rest break premiums at the employee’s “regular rate of pay,” rather than the base hourly rate.

Implications of Arbitration Agreements
The California Supreme Court last year upheld that PAGA plaintiffs retain the right to pursue representative claims, even if the individual claim is compelled to arbitration.

Individual Liability Under the Labor Code
California Labor Code Section 558.1 extends potential liability for minimum wage violations to company owners, directors, officers, and managing agents, equating them with the employer in these cases.

Anticipated Changes: The November 2024 Ballot Measure
The upcoming California Fair Pay and Employer Accountability Act seeks to address longstanding criticisms of PAGA since its 2004 enactment. Key features of the proposed initiative include:

  • Doubling statutory and civil penalties for willful violations.
  • Allocating 100% of monetary penalties to the affected employees, compared to the current 25%.
  • Excluding attorney’s fees from awards, which are presently available under PAGA.
  • Mandating that the Division of Labor Standards Enforcement (DLSE) be included in all labor complaints filed to the Labor Commissioner.
  • Ensuring full funding of the DLSE by the state legislature to meet legal requirements.
  • These proposed changes signify a substantial shift in how labor violations could be managed and penalized in California.

Have questions? Contact us. Meyers Nave is committed to keeping our clients informed and prepared for these potential legal landscapes.

PFAS Safe Drinking Water Act Maximum Contaminant Levels Set

Over the next five years, U.S. EPA hopes its new national drinking water standard will reduce per- and polyfluoroalkyl substances (“PFAS”) compounds in drinking water to almost zero as a way to prevent potential health risks associated with the chemicals.  On April 10, 2024, EPA finalized Primary Drinking Water Standards that it estimates will require public water systems to spend $14.4 billion to achieve the new maximum contaminant levels (“MCLs”) for six PFAS chemicals. (See April 8, 2024 Pre-Publication PFAS National Primary Drinking Water Regulation Preamble (“Preamble”).) Just days prior, on April 5, 2024, California’s Office of Environmental Health Hazard Assessment (“OEHHA”) adopted public health goals for two PFAS chemicals:  perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOS”).  These public health goals will lead to lower MCLs in California for PFOA and PFOS.

These are three questions that the new federal MCLs raise:

  1. Do the new MCL requirements affect the majority of public water systems nationwide?   The scope of the new MCLs require public water systems to monitor, report, and by 2029 remediate PFAS in drinking water. The affected entities are every public water system that serves “an average of at least twenty-five individuals daily at least 60 days out of the year.”  (Preamble, § I.B’ 40 C.F.R. § 141.2.)
  2. Will the new federal MCLs affect other non-drinking water regulatory programs?   The new federal MCLs will influence and potentially drive other standards such as effluent limits that wastewater treatment plants must meet to comply with permits issued under the National Pollutant Discharge Elimination System (“NPDES”) regulations and remediation clean-up levels for ground or surface waters.
  3. What are the true costs of compliance to achieve the federal MCLs? For the drinking water regulatory programs alone, the costs of compliance to achieve the federal MCLs are significant and range from EPA’s estimate of $14.4 billion to $47.3 billion, a reported estimate from American Water Works, the largest publicly traded water and wastewater utility company.

The impact of the new MCLs is important because although PFOA and PFOS largely have been phased out of production since the 1940s, the chemicals are still present in the environment.  (Preamble § II.B.) PFAS are synthetic “forever” chemicals that breakdown slowly and are commonly used in fast-food boxes and non-stick cookware as well as for other purposes (e.g., stain- and water-repellant clothing and carpets, some fire-fighting foams, and various industrial and manufacturing processes.)  (See e.g., July 2023 U.S. Geological Survey Study.) In California, monitoring data EPA reviewed found that 35.8 percent of California public water systems detected PFOA and 39 percent detected PFOS, with reported concentrations of PFOA ranging from 0.9 to 190 ppt and reported concentrations of PFOS ranging from 0.4 to 250 ppt.  (Preamble, § VI.)

  1. Federal MCL Requirements

EPA estimates that about 6% to 10% of the 66,000 public drinking water systems nationwide will need to reduce PFAS to meet the following new MCLs and unenforceable MCL Goals (“MCLGs”):

  MCLGs MCL
Perfluorooctanoic acid (“PFOA”) Perfluorooctane sulfonic acid (“PFOS”) Zero 4 ppt
GenX Chemicals Perfluorohexane sulfonic acid (“PFHxS”) Perfluorononanoic acid (“PFNA”) Hexafluoropropylene oxide dimer acid (“HFPO-DA”) 10 ppt 10 ppt
Mixtures containing two or more GenX or perfluorobutane sulfonic acid (“PFBS”) 1 (unitless)* 1 (unitless)

* There is no unit for this this Hazard Index MCL because it is a sum of fractions.  EPA is currently developing an online calculator that will add up each fraction that represents average PFAS ratios (e.g., PFHxS/10 ppt + PFNA level/10 ppt) and see if the annual average is greater than the MCL of 1. (
EPA Hazard Index Fact Sheet.)


At this time, these federal MCLs are for the most part slightly lower than the notification and response levels that California established in 2020 under the California Safe Water Drinking Act.  (See State Water Resources Control Board PFAS Webpage [setting forth 5.1 and 6.5 ppt notification levels for PFOA and PFOS, respectively, and 10 and 40 ppt response levels for PFOA and PFOS, respectively].) In California, however, public water systems will also be required to comply with California MCLs, which will be based on the new OEHHA public health goals (“PHGs”):

California Public Health Goal  
PFOA 0.007 ppt
PFOS 1 ppt


(OEHHA’s April 5, 2024 notice.) A PHG is the level of a drinking water contaminant at which adverse health effects are not expected to occur from a lifetime of exposure. Health & Safety Code §116365(a) requires a contaminant’s MCL to be as close to its PHG as is technologically and economically feasible. Some key takeaways from the final rule are as follows:

  • Monitoring. Public water systems have three years to complete initial monitoring (by 2027). Water systems must calculate the running annual average (using all samples and no composite samples). The overall annual average must be below the MCLs, and samples with results below 2 ppt are averaged as zeros. (Preamble, § VIII.B.3.) According to Section V of the Preamble, most laboratories (89%) can analyze levels accurately to as low as 2 ppt.
  • Public Notice. Beginning in 2027, public water systems must provide information to the public about PFAS levels, and, beginning in 2029, public water systems must provide notification to the public of any MCL violation. In California, Health and Safety section 116455 already requires timely notification by drinking water systems whenever a notification level is exceeded.
  • Compliance Deadline. By 2029, public water systems must reduce PFAS levels that exceed the MCLs. EPA has concluded that PFAS can be reduced or eliminated using granular activated carbon (“GAC”), anion exchange resins (“AIX”), and high-pressure membranes (nanofiltration (“NF”) and reverse osmosis (“RO”)). (Preamble, § X.)

EPA’s health-related evaluations concluded that the PFAS at issue are linked to many health effects ranging from liver and kidney cancers and low birth weight infants to high blood pressure and high cholesterol. (See id., §§ II.B, XII.F; Table 44; EPA Frequently Asked Questions (“FAQ”).)  One key finding throughout EPA’s rulemaking is that “[p]regnant and lactating women, as well as infants and children, may be more sensitive to the harmful effects of certain PFAS,” including the co-occurrence of the GenX Chemicals. (See e.g., Preamble, § II.)   Nearly half of the tap water nationwide contains at least one type of PFAS, according to a July 2023 U.S. Geological Survey Study.  EPA’s PFAS webpage recommends that households use certain certified water filters to reduce PFAS but the “current certification standards for PFAS filters (as of April 2024) do not yet indicate that a filter will remove PFAS down to the levels EPA has now set for a drinking water standard.  EPA also recommends nursing mothers ask pediatricians about potential PFAS exposures while nursing or giving infants formula, according to the EPA FAQ.

The Executive Summary of the rulemaking concludes that “the quantifiable annual [health] benefits of the final rule will be $1,549.40 million per year” based on the monetized benefits associated with 29,858 fewer illnesses and 9,614 fewer deaths.  EPA further found that “the quantifiable costs of the rule will be $1,548.64 million per year.”  This analysis supports EPA’s Executive Summary conclusion that the costs of the rule are justified by the benefits.  EPA did receive comments that it over-estimated health benefits (see e.g., id., § XII.A.1) and underestimated compliance costs (see e.g., id., at § XII.A.2).

  1. Non-Drinking Water Impacts

What EPA opted not to address in the MCL rulemaking is that the MCLs will affect non-drinking water environmental programs.  The MCLs set up a reference point that other state and federal agencies undoubtedly will use to evaluate allowable PFAS levels in wastewater discharges and at remediation sites.  For example:

  • NPDES Permits – A Regional Water Quality Control Board uses MCLs to determine allowable pollutant levels in discharges of water. Most, if not all, Water Quality Control Plans (called Basin Plans) throughout the state include a Chemical Constituents objective that requires compliance with MCLs for discharges to waters designated for municipal supply. For example, the Los Angeles Region Basin Plan states in Chapter 3: “Water designated for use as Domestic or Municipal Supply (MUN) shall not contain concentrations of chemical constituents in excess of the limits specified [Title 22 State MCLs] . . .”  Thus, the numeric levels in state MCLs (once adopted based on the PHGs) will be automatically incorporated into limits applicable under Basin Plans.  Additionally, under 40 C.F.R. § 122.44(d), if a point source discharge has reasonable potential to cause or contribute to an exceedance of a water quality standard, historically a Regional Water Board will impose a water-quality-based effluent limitation.
  • Clean-ups The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) or similar state laws often seek that MCLs be attained in remediation actions, including CERCLA removal actions. EPA has stated that “typically MCLs should be attained to the extent practicable during the removal action[.]” (EPA Removal Management Level User Guide.)
  • POTWs The EPA has provided guidance for pretreatment and wastewater disposal to manage PFAS that enter the sanitary sewer system and must be managed by publicly owned treatment works (“POTWs”). (See e.g., USEPA, Addressing PFAS Discharges In EPA-Issued NPDES Permits And Expectations Where EPA is the Pretreatment Control Authority (April 28, 2022); USEPA, Addressing PFAS Discharges in NPDES Permits and Through The Pretreatment Program and Monitoring Programs (December 5, 2022)). EPA has stated that “[s]ite-specific technology-based effluent limits (TBELs) for PFAS discharges developed on a best professional judgment (BPJ) basis may be appropriate for facilities for which there are no applicable effluent guidelines (see 40 CFR 122.44(a), 125.3).”  (Dec. 2022 EPA Guidance.)
  • Hazardous Waste EPA’s MCL rulemaking concludes that potential hazardous waste disposal requirements may increase treatment costs but only marginally up to 12 percent. (Preamble, §§ V, X.C.) EPA’s conclusion may underestimate these costs because EPA has not yet updated its 2020 PFAS Destruction and Disposal guidance.  (§ X.C.2.)

EPA’s failure to consider non-drinking water costs was intentional because it asserts that under the Safe Drinking Water Act, EPA must “exclude ‘costs resulting from compliance with other proposed or promulgated regulations’” and is required only to include “costs that ‘are likely to occur solely as a result of compliance with the [MCL].’”  (Id., § V.)

  1. Costs of Compliance

The compliance costs that public water systems will incur to achieve the federal MCLs appear uncertain and range considerably.  EPA estimates that the initial capital costs to comply with the MCLs will be approximately $14.4 billion nationwide and “reasonably anticipates” that federal funding of $11.7 billion in Drinking Water State Revolving Fund and an additional $5 billion for emerging contaminants, should “be able support a substantial portion of the initial capital costs of the final rule.”  (Preamble, §XII.A.2.)

In late November 2023, American Water, the largest publicly traded water and wastewater utility company, estimated about “$47 billion in infrastructure investments across the U.S. to treat for PFAS at four parts per trillion.”  (See CNBC Nov. 30, 2023 “U.S. tap water has a $47 billion forever chemical problem.”)  Though the $47.3 billion American Water estimate is not mentioned in the Preamble, Section XII.A.2.a and Table 24 of the Preamble dispute a study conducted by Black & Veatch on behalf of the American Water Works Association in detail, specifying, for example, that granulated activated carbon (“GAC”) treatment should cost $300,000 per unit (to treat 1 million gallons a day) not $900,000 and that the new MCLs will affect 5,136 total public water systems, not 7,449 systems as Black & Veatch estimated.

The $14.4-billion EPA estimate also is at odds with estimates by California water districts.  In 2020, a total of eleven water districts in Orange County, California, including the Orange County Water District, estimated $1 billion in PFAS clean-up costs, according to a lawsuit filed by these water districts against DuPont, 3M, Chemours and Corteva.  (See CMBG3 Law Dec. 3, 2020 Newsletterhttps://www.cmbg3.com/california-water-district-pfas-lawsuit-1-billion-at-stake.)  If $1 billion is an accurate estimated for 11 California water districts, this would result in approximately $90.9 million per water district, not $2.8 million per public water system based on EPA’s estimate (i.e., $14.4 billion/5,136 public water systems.)

Whatever compliance costs will be, public water systems will need funds over the next five years to pay for treatment systems. For small or disadvantaged communities, the federal Emerging Contaminant (“EC”) fund can be used for eligible projects.  State funds are also available through the State Water Resources Control Board, which under the California Budget Act of 2021 was most recently appropriated $20 million from the General Fund for technical and financial assistance for the 2023-2024 fiscal year.  (See SWRCB PFAS Funding Webpage and California Supplemental Intended Use Plan.)

Court of Appeal Confirms (Again) that CEQA Statute of Limitations Runs from the First Project Approval

The Second District Court of Appeal confirmed again that the California Environmental Quality Act (CEQA) favors finality in rejecting a challenge to a subsequent project approval for a 42-single family home project in Los Angeles.

In Guerrero v. City of Los Angeles the Court of Appeal reversed a trial court judgment setting aside a mitigated negative declaration (MND) and requiring an Environmental Impact Report (EIR) for the project because petitioners did not sue within the 30 days after the Notice of Determination (NOD) for the MND and first project approval in 2020. Confirming long-standing law against re-opening CEQA for every subsequent action that implements a project, the Court held “later adoptions of the same MND cannot restart or retrigger a new limitations period.”

Background

As is not uncommon for many developments, the City’s approval of the project involved many steps and revisions of the project, during which the City filed numerous NODs. The City originally adopted the MND when the City’s Planning Department approved a vesting tentative tract map on March 3, 2020. On March 25, 2020, the City filed a NOD pursuant to CEQA Guidelines Section 15074. Then, in May 2020, the City’s Planning Commission approved various zoning determinations and adjustments for the project, and recommended the City Council adopt the zone change required for the project. A letter of determination was issued on January 14, 2021, and a second NOD was filed on February 4, 2021. On June 8, 2021, the City Council again adopted the MND, rezoned the site, and filed a third NOD on June 18, 2021. On July 16, 2021, Petitioners filed a challenge to the City Council’s 2021 project approvals.

Court of Appeal’s Findings

Petitioners claimed their CEQA claim was timely because it was filed within 30 days of the third NOD. The Court of Appeal disagreed finding “[i]t is the first approval that triggers the running of the statute of limitations, and later approvals do not restart the statute of limitations clock.” The Court based its decision on the following reasons:

  • Environmental Review Must Occur at Earliest Feasible Opportunity. The Court recognized that “[t]he mere possibility that a project may change as it moves through the planning process does not preclude applying CEQA’s requirements at the early stages of project review.” Here, the City properly conducted its environmental review before making any project approvals.
  • CEQA’s Statute of Limitations is Triggered by the First Project Approval, Even for Projects Subject to Numerous Discretionary Approvals. CEQA Guidelines, § 15378 further makes clear that a “project” subject to CEQA “refers to the activity which is being approved and which may be subject to several discretionary approvals by governmental agencies. The term ‘project’ does not mean each separate governmental approval.” As the Court noted, “the City made its earliest firm commitment to the Project when it approved the vesting tentative tract map, even though there were conditions attached to the approval,” and, thus, that was the proper “project approval” for triggering CEQA’s limitations periods.
  • The 30-Day Statute of Limitations Applies Where an NOD is Filed. For these reasons, “[t]he City’s March 25, 2020 NOD was effective to trigger a 30-day statute of limitations on any challenge to the validity of the MND.”
  • A New Statute of Limitations is Triggered Only Where Subsequent or Supplemental Review is Required. The Court also noted CEQA’s statutory presumption under Public Resources Code section 21166 against additional environmental review for implementing approvals, which is limited to where there are substantial project changes, new information or changed circumstances resulting in new or more severe impacts. The Court rejected Petitioners argument that this presumption did not apply the prior CEQA review as an MND. The Court noted the presumption still applied: “there have been no changes to the Project requiring a subsequent or supplemental MND, the later adoptions of the same MND cannot restart or retrigger a new limitations period.”

Conclusion

The key take away is that in multi-phase development projects, the first project approval in a series of discretionary project approvals for the same project always will trigger CEQA’s statute of limitations.

Once that limitations period has run, there can be no further CEQA compliance challenges to the project unless subsequent or supplemental review is triggered under Public Resources Code §21166. This is the same even when the project was originally approved based on a MND, rather than an EIR. To allow otherwise, reasoned the Court, would undermine the need for finality and predictability for land use decisions.

California Employer’s Legal Update: Summary of New Laws Effective January 1, 2024

Following our annual Employment Law Update webinars for Private Sector and Non-Profit Employers, and Public Entity Employers, our Labor & Employment Team provides a summary of their 2024 Employment Law Update detailing new and evolving laws for all types of employers.

This 2024 Employment Law Update covers the following new laws effective January 1, 2024:

  • Reproductive Loss Leave for Employees (SB 848) by Nadia Bermudez
  • Federal Pregnancy Workers Fairness Act by Corrin Phillip
  • Paid Sick Leave Now At Least 5 Days (SB 616)
  • Minimum Wage
  • Workplace Violence Prevention Program (SB 553) by Janine Braxton
  • Presumption of Retaliation (SB 497) by Jesse Lad
  • Increased Minimum Wage for Health Care Workers (SB 525) by Nicole Ries Fox
  • Fast Food Minimum Wage Increase (AB 1228) by Nicole Ries Fox
  • Food Handler Cards (SB 476) by Nicole Ries Fox
  • Ban on Noncompete Agreements & Notice Requirements (SB 699, AB 1076) by Suzanne Roten
  • Arbitration Enforcement (SB 365) by Corrin Phillip
  • Off-Duty Cannabis Use & Drug Test Results (AB 2188 & SB 700) by Neha Shah
  • Enforcement of Labor Code Violations (AB 594)

What Public Employers Should Know About Liability for Employee Work-From-Home Expenses

A recent California Court of Appeal case (Krug v. Board of Trustees of the California State University) has implications for public agencies regarding employee reimbursement for work-from-home expenses.

Even though Labor Code Section 2802 does not explicitly or implicitly mention that it applies to government agencies, public employers should know they could still be responsible for an employer’s necessary expenditures to work from home.

This article breaks down the key takeaways and offers guidance.

Key Takeaways:

  • Labor Code Section 2802: This section requires employers to reimburse employees for reasonable and necessary work-related expenses.
  • CSU Case: In August, a California Court of Appeal ruled that California State University (CSU) did not have to reimburse a professor for home-office equipment and supplies acquired during the pandemic. The court cited CSU’s sovereign power granted by the California Education Code, allowing it discretion over purchases and reimbursements.
  • Sovereign Powers Doctrine: Public agencies are generally exempt from Labor Code requirements unless specifically included. The Sovereign Powers Doctrine shields public entities unless their inclusion would infringe on their sovereign powers, often granted by other laws.
  • Three-Part Test: The court applied a three-part test to determine whether the Sovereign Powers Doctrine applied:
    (1) Does the Labor Code provision explicitly mention governmental agencies?
    (2) Is there legislative intent to exempt them?
    (3) Would applying the Labor Code provision infringe on sovereign powers?
  • Krug’s Case: In Krug’s case, Labor Code Section 2802 did not expressly mention governmental agencies, and the legislative intent was silent. However, CSU’s sovereign power over expenses, granted by the Education Code, led to the denial of reimbursement.
  • Potential Liability: This case implies that public agencies might be liable for employee work-from-home expenses if their governing legislation doesn’t explicitly grant discretion for such reimbursements.

Guidance for Public Agencies:

  • Review Governing Legislation: Public agencies should carefully review the legislation that grants them sovereignty. If it does not explicitly address employee work-from-home expenses, they may be at risk for potential liability.
  • Consult Legal Experts: It is advisable for public agencies to consult with experienced attorneys to assess their liability under this new court holding and ensure compliance with labor laws.

In summary, the recent court case has highlighted the potential liability for public agencies in reimbursing employees for work-from-home expenses.

Public agencies should assess their governing legislation and seek legal counsel to navigate this complex issue and determine their obligations under Labor Code Section 2802.

State Adopts Expansive CEQA Infrastructure Streamlining Plan

On July 10, Governor Newsom signed five California Environmental Quality Act (CEQA) reform bills (SB 145, 146, 147, 149 & 150) as part of an infrastructure streamlining plan that the Governor’s office has called the “the state’s most ambitious permitting and project review reforms in a half-century.” Another component of this plan was Executive Order (EO) N-8-23 issued by Governor Newsom on May 19 which included measures to streamline the permitting and approval process for infrastructure projects intended to maximize California’s share of federal money under the Infrastructure Investment and Jobs Act and Inflation Reduction Act. Combined, the changes will provide for significant streamlining for qualifying infrastructure projects while providing more modest changes to litigation procedure in CEQA cases.

SB 149 amends Public Resources Code section 21167.6 to clarify and streamline procedures related to the preparation of the administrative record for the judicial review of legal challenges brought under CEQA in order to reduce litigation time. These new procedures, which apply to all types of projects, will include allowing a public agency to elect to prepare the record, setting a time limit for a petitioner to prepare the record within a 60 day deadline following notification of election to prepare the record, requiring good cause for extensions of record preparation and requiring that the record be prepared in a hyperlinked electronic format with limited exception. SB 149 also contains a CEQA Judicial Streamlining measure that provides for expedited judicial review of challenges under CEQA to certain water, transportation related, clean energy, and semiconductor or microelectronic projects. For the defined types of projects, any CEQA litigation, including appeals, would need to be resolved, to the extent feasible, within 270 days.

SB 146 permanently extends Government Code § 13979.2, which allows the California Secretary of Transportation to assume responsibilities under NEPA, and eliminates the January 1, 2025 sunset provision under existing law. As a result, the NEPA approval process will likely be streamlined given that joint federal/state agency preparation of documents is a more complicated and lengthy process. SB 147 includes reclassifying certain fully protected species and exempting any change in the California Endangered Species Act (CESA) status of any of the remaining exempted species from compliance with CEQA. In particular, the law repeals the four existing statutes designating species as “fully protected” under California law and consolidates regulations into the CESA. SB 145 requires Caltrans to ensure construction of three wildlife crossings over I-15 if an intercity passenger rail project is constructed, while SB 150 embeds workforces and community benefit requirements into contracting related to several federal programs.

Prior to passage, the plan’s legislative package was composed of 11 CEQA reform bills. Governor Newsom asked the state legislature to fast track the 11 CEQA reform bills concurrent with their duty to adopt a budget by June 15. However, the reform bills were not included in the Budget Act of 2023 passed on June 15 (SB 101). Instead, the reform bills were passed by the Legislature as separate bills in conjunction with an amended budget. The five bills included nearly all the content of the 11 CEQA reform bills except that the Governor agreed to drop a provision that could have fast-tracked the Delta Conveyance project. The language of the Governor’s Executive Order is general and broad in scope. Its implementing measures still need to be developed by an Infrastructure Strike Team responsible for maximizing federal and state funding opportunities for California infrastructure projects.

If you have any questions about the CEQA reform bills, please contact a member of Meyers Nave’s Land Use and Environmental Law team.

PAGA Standing and Arbitration: What California Employers Need to Know Now That the California Supreme Court Has Spoken

On July 17, 2023, the California Supreme Court issued its decision in Adolph v. Uber Technologies, Inc. With this decision California employers need to understand that plaintiffs do not lose standing when individual California Private Attorneys General Act (“PAGA”) claims are sent to arbitration and the PAGA claims of the other class members are likely to be stayed, rather than dismissed, pending determination in arbitration concerning whether a plaintiff is an “aggrieved employee.”

In Adolph, the Court addressed the question of whether an employee who was compelled to arbitrate individual Labor Code and PAGA claims maintains statutory standing to represent a class of other employees in companion PAGA claims. In a unanimous decision, the Court answered the question, “yes,” going against the U.S. Supreme Court’s conclusion on the same issue in Viking River Cruises v. Moriana. Heavily relying on its previous decision in Kim v. Reins International California, Inc., the Court reaffirmed that plaintiffs have standing so long as they are “aggrieved employees.” An aggrieved employee is broadly defined as (1) “someone who was employed by the alleged violator” and (2) “against whom one or more of the alleged violations was committed.” The Court in Adolph ruled that arbitrating individual claims does not strip PAGA plaintiffs of “aggrieved employee” status.

As a practical matter, this means that PAGA representative plaintiffs can rely on the Adolph decision to argue that the underlying representative action should be stayed (and not dismissed) while they litigate their individual claims in arbitration. After their own individual claims have been resolved through arbitration, and assuming the arbitrator finds that the individual employee was a victim of at least one Labor Code violation, they can return to court to litigate claims on behalf of other employees under PAGA.

PAGA has been criticized for spawning frivolous lawsuits and burdening an already overly-taxed judicial system. A ballot initiative to repeal PAGA has now qualified for the 2024 California ballot. Supported by the California Chamber of Commerce and other California business groups, “The California Fair Pay and Employer Accountability Act” would replace PAGA and restore wage/hour law enforcement to the California Department of Labor Standards Enforcement (DLSE). While the future of PAGA is uncertain, one thing is clear – in the short term, the Adolph decision will undoubtedly lead to increased PAGA litigation in the California courts.

Notwithstanding the Adolph decision, mandatory arbitration agreements remain a valuable tool for California employers. If you have any questions about the decision and how it may impact your operations, please contact a member of Meyers Nave’s Labor and Employment team.

Recent Developments Since the Viking River Cruises Decision: 5 Key Things California Employers Need To Know

The legal landscape for California employers has shifted rapidly since the recent U.S. Supreme Court’s decision in Viking River Cruises v. Moriana.

Here are 5 recent developments California employers need to know:

  1. PAGA Waivers: The Viking River Cruises decision was seen as a victory for California employers seeking to enforce PAGA waivers through arbitration agreements. The Supreme Court held that the Federal Arbitration Act (FAA) [preempts] California law’s prohibition on dividing individual and non-individual PAGA claims [through a valid arbitration agreement].
  2. Compelled Arbitration: Once individual PAGA claims are compelled to arbitration, non-individual PAGA claims must be dismissed for lack of standing, according to the Court’s ruling. However, there is ongoing debate among California courts regarding the interpretation of PAGA standing.
  3. Trial Court Approach: Most California trial courts are currently staying non-individual PAGA claims to await the resolution of individual PAGA claims in arbitration and guidance from the California Supreme Court’s review of Adolph v. Uber Technologies. The arbitrator’s determination of whether the plaintiff is an “aggrieved employee” is crucial for [PAGA standing.]
  4. Appellate Court Decisions: Several California Court of Appeals decisions have disagreed with the Supreme Court’s standing interpretation in Viking River Cruises. These appellate courts rely on PAGA’s statutory language and previous California Supreme Court rulings, such as Kim v. Reins Int’l Cal., Inc., which allow plaintiffs to pursue PAGA claims even after settling non-PAGA claims.
  5. Adolph v. Uber Technologies: The California Supreme Court heard oral arguments in Adolph v. Uber Technologies on May 9, 2023, to address the issue of standing for non-individual PAGA claims after the plaintiff is compelled to arbitrate their individual claims. The Court’s decision, expected by August 7, 2023, will provide clarity on this matter.”

To further elaborate on these developments, please see the following:

What Happens to the “Non-individual” PAGA Claims Now that Viking River Cruises Compels Arbitration of the “Individual” PAGA Claim?

The U.S. Supreme Court’s 2022 decision in Viking River Cruises v. Moriana was widely seen as a victory for California employers seeking to enforce PAGA waivers contained in arbitration agreements.[1] Since that time, a number of California courts have weighed in on the impact of the Viking River Cruises decision in the context of PAGA claims. On May 9, 2023, the California Supreme Court heard oral arguments in Adolph v. Uber Technologies to determine whether a plaintiff lacks standing to pursue a non-individual PAGA action based on Labor Code violations against other employees after the plaintiff is compelled to arbitrate their individual claims.  We expect the Court to issue its opinion in Adolph v. Uber Technologies by August 7, 2023.

What Happened in Viking River Cruises?

Last summer, the U.S. Supreme Court held that the Federal Arbitration Act (“FAA”) preempts California law’s prohibition of the division of an individual PAGA claim from a non-individual PAGA claim through a valid arbitration agreement.[i]  The Court also held that once individual claims are compelled to arbitration, the non-individual PAGA claims must be dismissed for lack of standing.[ii]  However, Justice Sotomayor’s concurrence invited California courts and Legislature to decide whether their interpretation of PAGA standing is correct.[iii]  Shortly after, the California Supreme Court granted review of Adolph.[iv]

What are California Trial Courts Doing in The Meantime?

California courts have followed the U.S. Supreme Court’s holding that individual PAGA claims can be compelled to arbitration.  Most state trial courts are staying the non-individual PAGA claims (1) to await the adjudication of the individual PAGA claims in arbitration and/or (2) to wait guidance from the California Supreme Court’s review of Adolph.

Some of these courts explain that a stay is appropriate because the arbitration will determine whether the plaintiff is an “aggrieved employee.” [v]  These courts underscore that under the statute, an “aggrieved employee” is (1) “any person who was employed by the alleged violator” and (2) “against whom one or more of the alleged violations was committed.”[vi]  Therefore, if an arbitrator decides that a plaintiff cannot prove the alleged Labor Code violations, the plaintiff is not “aggrieved” and does not have standing to move forward with the non-individual claims.[vii]

In February 2023, the Second District applied this reasoning in Rocha v. U-Haul.[viii]  However, Rocha is at odds with Gavriiloglou v. Prime Healthcare Management, Inc., holding that a plaintiff who loses on their individual claims in arbitration nevertheless sustains representative PAGA standing because “a party bound by issue preclusion must have been a party to the previous action in the same capacity.”[ix]  The Rocha court disagreed, stressing that issue preclusion does not require “identical capacity.”[x]  Therefore, where employers win arbitration of the individual PAGA claims, non-individual PAGA claims may be dismissed, but such outcome is not guaranteed at this time, given the budding split among the state appellate courts.

Other trial courts have stayed the non-individual PAGA claims pending the Adolph decision.[xi]  In some cases, trial courts have issued stays citing both the impending Adolph decision and awaiting the conclusion of arbitration.[xii]

Have the California Court of Appeals Weighed In?

Six California Court of Appeals have disagreed with Viking River on the standing issue.[xiii]  Five of these decisions bind state trial courts: Galarsa v. Dolgen Cal., LLC, Piplack v. In-N-Out Burgers, Gregg v. Uber Techs., Inc., Seifu v. Lyft Inc., Nickson v. Shemran, Inc.  The most recent decision, Quintero v. Dolgen Cal., LLC, concluded the same in an unpublished opinion.[xiv]  The appellate courts anchored their standing analysis on PAGA’s statutory language of “aggrieved employee.”  Central to their analysis is also the California Supreme Court’s holding in Kim v. Reins Int’l Cal., Inc., which holds that a plaintiff has standing to pursue PAGA claims even if the plaintiff settles the underlying non-PAGA claims.[xv]

After Viking River Cruises, the Galarsa court declined to follow the U.S. Supreme Court’s interpretation of standing, stating that “PAGA standing does not evaporate when an employer chooses to enforce an arbitration agreement.”[xvi]  The Galarsa court predicted that the California Supreme Court will reach the same conclusion.[xvii]  Likewise, the Fourth District’s decision in Piplack reiterated the statutory language and explained that it “could not reconcile” Viking River Cruises with Kim.[xviii]  Similarly, in Gregg, the Second District ordered the plaintiff to arbitrate the individual PAGA claims and stayed the non-individual claims pending arbitration.[xix]  Later, in Seifu, the Second District concluded “that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration.”[xx]  The Fourth District reached the same conclusion in Nickson, but left “management of the superior court litigation during the pendency of arbitration to the trial court’s sound discretion.”[xxi]

What Did the Parties Argue in Adolph v. Uber?

Uber urged the Justices that the non-individual claims must be dismissed because the “Legislature linked the individual to the representative right to proceeding on behalf of himself and others.”  Concluding otherwise would foster “a ton of litigation.”  Uber cautioned that finding for Adolph “would put PAGA on a collision course with the Federal Arbitration Act, and it would wreak havoc on PAGA’s statutory framework.”  However, Justice Liu responded by saying, “I don’t see what the FAA problem is, that argues in favor of nonstanding here.”  Citing Robinson v. Southern Counties Oil Co., Uber explained that if Adolph’s individual claim is adjudicated in arbitration, “it will be resolved” and “after that occurs, Mr. Adolph will have received all the relief he could possibly hope to gain.”  Uber stressed that Adolph would not have “skin in the game” to pursue the non-individual claims after being compelled to arbitration.  The “no skin in the game” argument appears to be Uber’s strongest point and the court asked Adolph’s counsel to address this reading of the statute.

Adolph argued that a PAGA claim is a single claim proceeding in two forums—arbitration and court.  Adolph pointed out that neither Viking River Cruises nor the FAA uses the language of “severance” and that the California Courts of Appeal, and Justice Lui agree that a PAGA action is a single claim.  Adolph argued that a determination of an aggrieved status “is the skin in the game.”  Relying on Kim, Adolph argued that until there is a determination on whether a plaintiff is an “aggrieved employee,” the statute does not prevent a plaintiff from pursuing non-individual claims in court.  However, Adolph agreed that if, in arbitration, the plaintiff “is found not to be an aggrieved employee, that’s the end of the case.”

The Justices also invited discussion regarding whether staying non-individual PAGA claims should be required pending arbitration.  Adolph argued that a stay is not always required, but agreed that a trial court would have to accept an arbitrator’s adjudication regarding whether a plaintiff is “aggrieved.”  The Justices seemed unconvinced and a critical comment came from Justice Groban, who responded, “Your reasoning is leading us pretty hard toward a stay.”

While the court pushed back against the arguments of both parties, employers faces tough hurdles in Kim, and the recently published Courts of Appeal decisions.  Nevertheless, moving forward, arguments crafted by plaintiffs against staying non-individual claims are likely weak because arbitration would determine whether a plaintiff is “aggrieved” under PAGA.

We will stay tuned for the high court’s decision this summer and keep you posted.

 

[1] 142 S.Ct. 1906 (2022). For additional background, see the June 15, 2022 Meyers Nave Alert on Viking River Cruises here: https://www.meyersnave.com/supreme-court-tells-plaintiffs-to-port-individual-paga-claims-into-arbitration/

[i] Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906, 1924 (2022).

[ii] Id. at 1925.

[iii] Id. at 1925-6.

[iv] Adolph v. Uber Techs., Inc., No. G059860, 2022 WL 1073583 (Cal. Ct. App. Apr. 11, 2022), review granted (July 20, 2022).

[v] Arboleda v. Guardian Pharm. of S. Cal. LLC, No. 37-2021-00008791-CU-OE-CTL, 2022 LEXIS 54023, at *8 (Cal.Super., San Diego County Aug. 5, 2022); Lepe v. Bristol Farms, No. 21STCV05909 (Cal.Super., Los Angeles County Sept. 9, 2022); Adams v. Pacific Villa, Inc., No. 20STCV37260 (Cal.Super., Los Angeles County July 27, 2022); Gozzi v. Acadia Malibu, No. 19STCV39861, 2022 LEXIS 69347, at *8 (Cal.Super., Los Angeles County July 13, 2022).

[vi] Cal. Lab. Code, § 2698 et seq.

[vii] Hailey v. Specialty Rests. Corp., No. 30-2022-01255938, LEXIS 59899, at *9 (Cal.Super., Orange County Sept. 30, 2022).

[viii] Rocha v. U-Haul Co. of California, 88 Cal. App. 5th 65, 77-78 (2023).

[ix] Gavriiloglou v. Prime Healthcare Mgmt., Inc., 83 Cal. App. 5th 595, 606 (2022), as modified on denial of reh’g (Sept. 20, 2022), review denied (Jan. 11, 2023).

[x] Rocha, 88 Cal. App. 5th at 80-81.

[xi] Lopez v. P.R. Perneky Mgmt. Corp., No. 22AHCV00578, 2023 LEXIS 15712, at *12-14 (Cal.Super., Los Angeles County Feb. 2, 2023); Bobbitt v. Aurora Vista Del Mar LLC, No. 56202200563179CUOEVT, 2022 WL 17970744, at *1 (Cal.Super. Ventura County Dec. 15, 2022); Mendoza v. Streamline Finishes, No. 30-2021-01207462-CU-OE-CXC, 2022 LEXIS 82839, at *7 (Cal.Super., Orange County Dec. 1, 2022); Lynch v. Snp Pharm., No. 22PSCV00139, 2022 LEXIS 85667, at *17 (Cal.Super., Nov. 22 2022); Castro v. Clay Lacy Aviation, Inc., No. 21VECV00304, 2022 LEXIS 78750, at *10 (Cal.Super., Los Angeles County Nov. 17, 2022); Salazar v. Epiphany Care Homes Inc., No. 56202200562790CUOEVT, 2022 WL 4232874, at *1 (Cal.Super., Ventura County Aug. 25, 2022); Flores v. Amwest, Inc., No. 21STCV16066, 2022 LEXIS 56779, at *5 (Cal.Super., Los Angeles County Oct. 4, 2022).

[xii] Garcia v. St Paul’s Episcopal Home, No. 2022-22641, 2023 LEXIS 6021, at *8 (Cal.Super., San Diego County Jan. 27, 2023); Kunsman v. Patriot Environmental Servs., No. 34-2021-310042, 2022 LEXIS 69628, at *9 (Cal.Super., Sacramento County Oct. 25, 2022); Harden v. Staffing Solutions, Inc., No. HG21103640, 2022 WL 4348674, at *4-5 (Cal.Super., Alameda County Sep. 14, 2022); Jacobs v. Best Buy Stores, L.P., No. RG19001196, 2022 WL 4348676, at *4–5 (Cal.Super., Alameda County Sep. 14, 2022); Applegate v. Seed Beauty LLC, No. 56202100555658CUOEVT, 2022 WL 4595046, at *6 (Cal.Super. Ventura County Sep. 13, 2022); Mendoza v. Laguna Cookie Co., No. 19-1107762, 2022 LEXIS 55903, at *9-10 (Cal.Super., Orange County Aug. 12, 2022).

[xiii] Galarsa v. Dolgen California, LLC, 88 Cal. App. 5th 639 (2023), as modified on denial of reh’g (Feb. 24, 2023); Piplack v. In-N-Out Burgers, 88 Cal. App. 5th 1281 (2023), review filed (Apr. 17, 2023); Gregg v. Uber Techs., Inc., 89 Cal. App. 5th 786 (2023), review filed (Apr. 28, 2023); Seifu v. Lyft, Inc., 89 Cal. App. 5th 1129 (2023), review filed (May 9, 2023); Nickson v. Shemran, Inc., 90 Cal. App. 5th 121 (2023); Quintero v. Dolgen California, LLC, No. F083769, 2023 WL 1878201 (Cal. Ct. App. Feb. 10, 2023), as modified (Mar. 7, 2023), review granted (Apr. 26, 2023).

[xiv] Quintero v. Dolgen California, LLC, No. F083769, 2023 WL 1878201 (Cal. Ct. App. Feb. 10, 2023), as modified (Mar. 7, 2023), review granted (Apr. 26, 2023).

[xv] Kim v. Reins Int’l California, Inc., 9 Cal. 5th 73, 80 (2020).

[xvi] Id. at 643, 653

[xvii] Id. at 654 (“We predict that the California Supreme Court will conclude that California law does not prohibit an aggrieved employee from pursuing Type O claims in court once the Type O claims are separated from the Type A claims ordered to arbitration.”).

[xviii] Piplack, 88 Cal. App. 5th at 1285.

[xix] Gregg, 89 Cal. App. 5th at 792.

[xx] Seifu, 89 Cal. App. 5th at 1134.

[xxi] Nickson, 90 Cal. App. 5th at 121.

Sackett v. EPA: What Lies Ahead for Water Regulation and Wetland Protection?

On May 25, 2023, the U.S. Supreme Court reversed the Ninth Circuit’s decision in the Sackett v. EPA case in favor of the Environmental Protection Agency (“EPA”) and instead held that the Clean Water Act (“CWA”) only protects wetlands which are indistinguishable from waters of the United States.

In a unanimous decision, the Court rejected the significant nexus test previously used to protect wetlands with an ecological relationship to navigable waters. There was sharp disagreement on what the new rule should be, with four justices disagreeing that wetlands must have a continuous surface connection with waters of the United States to be granted CWA protection.

Nevertheless, the majority’s decision further restricted water bodies that can qualify as “waters of the United States” (“WOTUS”) and thereby receive the legal protections of the CWA.

What Does This Mean for Wetlands?

The Sackett decision provides a very clear standard that substantially restricts the federal government’s ability to regulate wetlands. Specifically, the Court ruled that for wetlands to be granted CWA protection, they must, first, be adjacent to a body of water that qualifies as “waters of the United States” and, second, have a continuous surface connection with those waters as indistinguishable parts. Under this rationale, according to the majority, wetlands that are entirely separate from traditional bodies of water do not fall under CWA jurisdiction. Following the Court’s decision, this means that projects across the country may no longer be subject to federal permitting, leaving the burden of protecting and regulating many wetlands to the states.

What Does This Mean for California?

The treatment of wetlands and waters regulated by the State of California will remain largely the same. The California State Water Resources Control Board, while disappointed in the Sackett decision, emphasized that it only narrows the scope of federal jurisdiction and does not weaken California’s more stringent protections for wetlands.[1] Having anticipated the Court’s decision, the State Water Board, moving forward, will increasingly rely upon California’s own regulatory wetlands protection programs which allow the Board to retain its authority to protect the 2.9 million acres of wetlands remaining in California today.[1]

What Does This Mean for Other Water Features?

The majority opinion is an express adoption of Justice Scalia’s plurality opinion in Rapanos v. United States, 547 U.S. 715, 742 (2006), which also served as the basis for the Trump Administration’s Navigable Waters Protection Rule.  The Court, shifting from the previous definition of WOTUS that encompassed all navigable waters and their adjacent tributaries and wetlands, limited this term in Sackett to include only those relatively permanent bodies of water forming geographical features ordinarily described as streams, oceans, rivers, and lakes.  While the nature and extent of Sackett’s impact on water bodies beyond wetlands is uncertain, the decision indicates that the Court considers permanency and navigability to be key factors in determining CWA jurisdiction, calling into question whether ephemeral streams and other water bodies that are not relatively permanent remain under federal oversight.  However, the Sackett decision did not provide clear direction to the EPA as to precisely how it must change its WOTUS rule.

What Are the Next Steps?

The EPA and the U.S. Army Corps of Engineers will interpret WOTUS according to the Court’s decision in Sackett. The agencies are currently reviewing the decision to determine their next appropriate steps, but stress the importance of a “common sense and science-based definition” of WOTUS to build upon the transformative progress the CWA has had thus far in preserving the nation’s waters for current and future generations.

If you have any questions about the decision and how it may impact your operations, please contact a member of Meyers Nave’s Water Law team.


[1] State Water Resources Control Board, California Water Boards, State Water Board Statement: U.S. Supreme Court Decision Decreases Federal Wetlands Protection (May 25, 2023).

[1] Id.