The California Supreme Court recently decided two related cases clarifying the interplay between two California laws that allow representative employment actions: (1) California’s unfair competition law (Business & Professions Code §§ 17200, et seq.) (“UCL”), which allows a private party to bring a class action on behalf of himself or herself and others, as long as the “representative party” has suffered injury in fact and has lost money or property as the result of the alleged unfair competition; and (2) California’s Private Attorneys General Act of 2004 (“PAGA”), which allows employees to bring an individual case and also assert claims on behalf of other employees to recover civil penalties for claimed violations of the Labor Code.

In the first case, Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (June 29, 2009), a union attempted to bring an action under these two laws, claiming that it was an assignee of the employees who had suffered actual injury, or was an association comprised of such individuals. The Court held that the union lacked standing to maintain the action, because it had not suffered actual injury as required under the first law and was not an aggrieved employee as required under the second law. This decision reduced the legal risk to employers from these types of claims.

In the second case, Arias v. Superior Court (June 29, 2009), the plaintiff sued a dairy and three of its owners under both laws, claiming that he and other employees had not been provided meal or rest breaks and had not been paid overtime. Although the Court ruled that he had no valid claim under the first law (UCL) because he had not satisfied class certification requirements, the Court allowed the employee to proceed with his claim under the second law (PAGA).

The Court reasoned that PAGA contains no requirement that an individual comply with the class certification requirements of Code of Civil Procedure §382, and since representative actions brought under PAGA confer plaintiffs with the same rights and interests as labor enforcement agencies, a judgment binds all parties involved, including the plaintiff, non-party employees, and any government agency.

The Court made it clear, however, that unlike PAGA claims, UCL claims require plaintiffs to satisfy class action requirements because the Secretary of State indicated to voters that class procedures would apply if Proposition 64, which amended PAGA, passed, and it did. To the extent that Amalgamated Transit limited PAGA’s reach by precluding assignment of PAGA claims, Arias appears to have made up some of the slack by allowing such claims to proceed without first satisfying class action requirements. Thus, California employers continue to be at risk for these types of representative claims.