In its recent decision concerning the proper scope of discovery under California’s Labor Code Private Attorneys General Act of 2004 – known as “PAGA” – the California Supreme Court authorized discovery just as broad as that available in California class action proceedings, while at the same time weakening the ability of defendants to object to such discovery on invasion of privacy grounds. As a result, Williams v. Superior Court, 5 Cal. 5th 331, 2017 WL 2980258 (Cal. July 13, 2017), presents new challenges for California employers and others in defending PAGA and similar “representative action” claims.
PAGA, set forth in California Labor Code sections 2698 et seq., authorizes and encourages employees to bring actions against their employers to recover civil penalties for certain Labor Code violations. A PAGA suit is essentially a qui tam or representative proceeding brought on behalf of all affected employees, and thus is similar to a class action. Unlike a class action, however, the named plaintiff is entitled to only 25 percent of any recovery, with the remaining 75 percent allocated to the State of California to fund enforcement and educational activities.
In the Williams case, the plaintiff alleged that his employer – Marshalls Stores – failed to provide required meal and rest periods or compensation in lieu of required breaks; understaffed stores, forcing employees to work during meal periods without compensation; directed managers to erase meal period violations from time records; instituted a systematic, company-wide policy to avoid paying premiums for missed breaks; failed to provide timely, accurate, and complete wage statements; and followed a policy and practice of forcing workers to carry out certain tasks without compensation. In early discovery regarding this pro forma laundry list of alleged wrongdoing, Williams served special interrogatories demanding the disclosure of contact information and basic employment history for all Marshalls employees in California. In response, Marshalls disclosed that it had roughly 16,500 California employees, and objected to furnishing their contact information on grounds of overbreadth, undue burden, and invasion of privacy.
Ruling on Williams’ motion to compel, the trial court directed Marshalls to provide employee contact information limited to the single store at which the plaintiff worked, subject to an opt-out notice to enable workers at that store to protect their privacy if they wished, and held open the possibility that following further discovery Williams might obtain contact information for additional employees depending on his ability to demonstrate that his claims had substantive merit. Recognizing that there was no controlling authority on this subject, the trial judge certified his order for immediate appellate review. The Court of Appeal upheld the order, ruling that Williams was required to “set forth specific facts showing good cause” for the broad discovery he had sought and also that, in view of the third party privacy interests involved, Williams “must demonstrate a compelling need for discovery” – in other words, “the discovery sought is directly relevant and essential to the fair resolution of the underlying lawsuit.”
In a unanimous opinion, the California Supreme Court reversed. The Court began with the fundamental proposition that a party has a right to obtain discoverable information, absent a clear legal prohibition. And in this instance, the California discovery statute expressly authorizes discovery of the identity and location of those who might have knowledge of discoverable evidence. As a result, Williams was presumptively entitled to the information he had sought, and the requirements which the trial court and Court of Appeal had attempted to impose on him to justify the interrogatories were improper. Rather, the California Supreme Court held that the burden clearly fell on Marshalls to substantiate its objections.
With respect to overbreadth, Marshalls argued that contact information as to employees who did not share Williams’ position, job classification, and store location “exceeded the scope of permissible discovery.” The Court, however, viewed Williams’ request as an effort to identify other aggrieved employees and to obtain evidence with respect to the state-wide Labor Code violations he alleged. The Court analogized the situation to a putative consumer class action where it had held that “[c]ontact information regarding the identity of potential class members is generally discoverable, so that the lead plaintiff may learn the identities of other persons who might assist in prosecuting the case.” Pioneer Electronics (USA), Inc. v. Superior Court, 40 Cal. 4th 360, 373, 53 Cal. Rptr. 3d 513, 150 P.3d 198 (2007). It found nothing in the purpose or language of PAGA to suggest that a different standard for discovery should apply. And it set aside differences between a class action and a PAGA case in terms of the differing duties of class versus PAGA counsel to those impacted by the case and in terms of possible binding impacts of judgments in class actions versus PAGA actions as potentially legitimate reasons for a trial court’s discretionary decision to alter the normal approach to discovery. In sum, “[t]he trial court had no discretion to disregard the allegations of the complaint making this case a statewide representative action from its inception,” and the Court of Appeal “likewise misread the complaint when it described Williams’ claim as ‘parochial” and thus affording no basis for statewide contact information.” 2017 WL 2980258, at *8.
Relative to burden, Marshalls argued that it should not be forced to provide contact information for thousands of other employees absent a prior showing that the named plaintiff himself had been subject to any alleged Labor Code violations or that at least some others had been. Marshalls did not, however, provide any information indicating how much effort or expense would be necessary to gather the data involved for its entire California workforce. That failure in proof proved fatal to the burden objection. The Court had little difficulty rejecting Marshalls’ attempt to impose a good cause requirement on Williams: “[a]s a general matter, the [discovery] statute… imposes no obligation on a party propounding interrogatories to establish good cause or prove up the merits of any underlying claims.” 2017 WL 2980258, at *9. Moreover, Marshalls had not made a formal request to the trial court to manage the sequence or timing of discovery “for the convenience of parties and witnesses and in the interests of justice.” Id. at *10. Accordingly, the burden contention was unavailing: “[t]hat the eventual proper scope of a putative representative action is as yet uncertain is no obstacle to discovery; a party may proceed with [discovery] precisely in order to ascertain that scope.” Id.
And then, turning to the question of privacy, the Court noted that neither the trial judge nor the Court of Appeal had undertaken the analysis mandated by Hill v. National Collegiate Athletic Ass’n, 7 Cal. 4th 1, 26 Cal. Rptr. 2d 834, 865 P.3d 633 (1994): (1) whether a legally protected privacy interest exists, (2) whether there is a reasonable expectation of privacy under the circumstances, and (3) the relative seriousness of the potential invasion of privacy. This framework had been extended over the years to the consumer class action arena, as in Pioneer Electronics, 40 Cal. 4th at 372, and to wage and hour class actions in California, as in Belair-West Landscape, Inc. v. Superior Court, 149 Cal. App. 4th 554, 561-562, 57 Cal. Rptr. 3d 197 (2007). Addressing these elements, the Court recognized that while other Marshalls employees had a reasonable expectation of privacy which was implicated by requests for their names and contact information, the second Hill factor – reasonable expectation of privacy under similar circumstances – was not met because those other employees might expect and indeed might even hope that their names and contact information would be shared so that their employment rights could be protected. And third, the potential seriousness of any invasion of privacy had been mitigated by Williams’ willingness to accept an opt-out arrangement for other employees. As a result, the Court rejected Marshalls’ privacy objection. 2017 WL 2980258, at *13.
But that was not all. The Court went on to discuss the manner in which the Court of Appeal had handled the privacy question. It observed that instead of following Hill, the Court of Appeal had started (and also essentially ended) its analysis by examining whether Williams, as the requesting party, had demonstrated a compelling state interest in the disclosure of the private information involved. In doing so, the Court of Appeal had followed a host of cases which effectively compressed the assessment of privacy objections down to that single consideration. Doing so, per the Supreme Court, was not appropriate: “[we reject] the de facto starting assumption that … an egregious invasion is involved in every request for discovery of private information. Courts must instead place the burden on the party asserting a privacy interest to establish its extent and the seriousness of the prospective invasion, and against that showing must weigh the countervailing interests the opposing party identifies….To the extent prior cases require a party seeking discovery of private information to always establish a compelling interest or compelling need, without regard to … other considerations … they are disapproved.” 2017 WL 2980258, at *14.
Applying this logic, the Court rejected several factors which the Court of Appeal had deemed important, including the fear of retaliation on the part of Williams’ fellow employees: “[to the extent real, this] cuts the other way, in favor of facilitating collective actions so that individual employees need not run the risk of individual suits.” 2017 WL 2980258, at *15. Nor, according to the Court, was it necessary for Williams to demonstrate the existence of any illegal uniform companywide policy as an element of “compelling need.” That “may be a convenient or desirable way to show commonality of interest in a case where class certification is sought, but it is not a condition for discovery, or even success, in a PAGA action, where recovery on behalf of the state and aggrieved employees may be had for each violation, whether pursuant to a uniform policy or not.” Id.
PAGA lawsuits are inherently difficult to defend, and the decision in Williams makes the task that much more difficult. While the sorts of objections which Marshalls raised are not absolutely foreclosed, employers in the future will have to advance far more compelling arguments and evidence to sustain those positions and avoid workforce- wide discovery.