Employers Cannot Remove PAGA Actions to Federal Court

The California Labor Code Private Attorneys General Act of 2004 (“PAGA”) does not provide a basis for employers to remove PAGA actions from state to federal court. PAGA allows employees to bring claims on behalf of the State of California against their employers. PAGA claims seek statutory penalties for violations of the California Labor Code, such as overtime and meal and rest period violations. Under PAGA, employees can bring the action on their own behalf and on behalf of other aggrieved employees and recover twenty-five percent of the statutory penalties, in addition to attorneys’ fees and costs. (The State retains seventy-five percent of the statutory penalties.)

In Baumann v. Chase Inv. Services Corp., 2014 WL 983587 (9th Cir., March 13, 2014, 12-55644), Baumann sued his employer in California state court under PAGA based on statutory violations for withheld overtime pay. Baumann did not assert any federal claims. However, Baumann’s employer removed the action to federal court based on the federal Class Action Fairness Act of 2005 (“CAFA”), which confers original jurisdiction in federal courts for certain class actions. Baumann’s employer argued that the PAGA claims were a class action under CAFA. The district court found removal to federal court was proper. The Ninth Circuit Court of Appeal reversed. The Court of Appeal held that the district court did not have original jurisdiction over Baumann’s removed PAGA suit under CAFA. The Court of Appeal determined that PAGA actions are not sufficiently similar to federal class actions because they are not claims for class relief. Rather, they are enforcement actions “filed on behalf of and for the benefit of the state.” Accordingly, CAFA did not provide a basis for federal jurisdiction of the PAGA lawsuit.

When employers are served with a lawsuit by their employees, one of the first considerations for defending that lawsuit will be deciding venue for the action in state or federal court. Employees generally file employment actions in State court. Employers oftentimes prefer to defend employment lawsuits in federal court. Federal courts have stricter pleading requirements, expedited discovery schedules, and may even be considered more employer friendly. Employers need to establish a grounds for federal jurisdiction in order to remove a state action to federal court. PAGA will not provide grounds for removing an action from state to federal court. But, a federal court may allow a PAGA action to proceed in federal court if the federal court has other grounds for establishing federal jurisdiction.

Employees have one year from the date of an allegedly wrongful act to file a complaint with the Department of Fair Employment and Housing under the Fair Employment and Housing Act (FEHA). Parties to a contract can agree to shorten statutes of limitation as long as the shortened period is reasonable, BUT employers probably cannot shorten the FEHA statute of limitations. Ellis v. U.S. Security Associates, 14 Cal. Daily Op. Serv. 3098 (Cal. Ct. App., Mar. 20, 2014) (six-month period not enforceable).