The following is a case summary written by Laura L. Lewis analyzing the recent decision in Hutcheson v. Superior Court (2022) 74 Cal.App.5th 932.
On February 7, 2022, the California Court of Appeal ruled on the narrow issue of whether an amended complaint for penalties pursuant to the Labor Code Private Attorneys General Act of 2004 [Lab. Code 2698 et seq. (PAGA)] could relate back to the original PAGA complaint. At stake was the length of time for which the employer may be liable for statutory civil penalties. Under PAGA, penalties assessed are meant to punish the employer and deter employer misconduct as well as provide a source of funding to enforce labor laws and educate employers and employees about their responsibilities and rights.
There was a stipulation in the trial court between the parties to permit a second employee with his own PAGA complaint to replace a first employee who was the original named plaintiff. However, the second employee had submitted his PAGA notice and filed his complaint well after the original complaint was filed.
For purposes of the statute of limitations, the relation back doctrine deems the claims in an amended complaint to have been filed on the date of the initial complaint. Because the parties could not agree on whether the relation back theory applied to the second employees’ claim, the parties stipulated to the filing of a motion for summary adjudication on the issue.
The trial court granted respondent’s motion for summary adjudication ruling that the doctrine of relation back does not apply to PAGA claims. Petitioner filed a writ of mandate. The Court of Appeal, reviewing de novo, reversed. A peremptory writ of mandate issued directing respondent court to vacate its order granting employer’s motion for summary adjudication, and entering a new order denying the motion.
The stipulated facts involved a first employee, Larry Van Steenhuyse (Van Steenhuyse), who worked at UBS Financial Services, Inc. (USB) as a financial advisor. On December 22, 2017 Van Steenhuyse gave notice to USB and the Labor Workforce Development Agency (LWDA), the government entity on whose behalf the plaintiff files suit, of his intention to seek penalties under PAGA. The PAGA complaint sought penalties for himself and all aggrieved UBS financial advisors in California for alleged Labor Code violations. Receiving no response from the LWDA within the statutorily required 65 day wait period, on the 66th day, February 26, 2018, Van Steenhuyse filed suit against his former employer alleging a single cause of action for penalties under PAGA, alleging violation of section 2802 for failing to indemnify financial advisors for business expenses and section 204 regarding timely payment of commissions. [Suit is permitted by Labor Code §2699.3 subd. (a)(2)]
The second employee, Andrew Hutcheson (Hutcheson), had also worked at USB as a financial advisor and resigned in December 2017. Hutcheson’s notice to USB and the LWDA was not submitted until April 18, 2018. Hutcheson sought penalties for himself and all aggrieved UBS financial advisors in California for alleged failure to reimburse business expenses and timely pay of commissions. Hutcheson also fulfilled the statutory 65-day LWDA response period but then waited several months not filing his suit against UBS until February 2019. Hutcheson’s suit, like Steenhuyse’s complaint, alleged a single cause of action under PAGA for alleged violations of sections 2802 and section 204.
Trial Court Proceedings
In March 2019, Hutcheson filed a motion to intervene in Van Steenhuyse’s lawsuit and to replace Van Steenhuyse as the named plaintiff (Van Steenhuyse was reported “no longer able to bear the financial burden and risk associated with serving as the named plaintiff in the litigation” and was concerned that his dismissal of the complaint “would operate as res judicata with respect to all claims for civil penalties” on the violations named in his complaint). The parties had stipulated to the filing of an amended complaint adding Hutcheson and removing Van Steenhuyse. Parties also stipulated to dismissal of Van Steenhuyse’s PAGA claim with prejudice, and to the dismissal of Hutcheson’s lawsuit without prejudice, but could not agree upon the application of the doctrine of relation back.
Importantly, the amended complaint alleged that application of the relation back doctrine (as applied to the statute of limitations for Hutcheson’s claim as a substitute plaintiff) would extend back to December 22, 2016, which was one year before Van Steenuyse submitted his notice of intent. UBS disputed the relation back.
USB’s motion for summary adjudication asserted Hutcheson was barred from PAGA penalties for violations that occurred before December 19, 2017, one year and 65 days before Hutcheson had filed his own suit. Arguing the amended complaint did not meet the general requirements of relation back, UBS also argued that even if relation back applied to amended complaints it did not apply to Hutcheson’s complaint because Hutcheson had not submitted his PAGA notice until after the Van Steenhuyse complaint was filed.
Discussing the purpose of the PAGA legislative enactment, the Court emphasized the PAGA representative action is a type of qui tam action and the LWDA is the real party in interest. Hutcheson v. Superior Court (2022) 74 Cal.App.5th 932, 939. The statute requires an aggrieved employee to file the lawsuit on behalf of the LWDA; with 75% of the recovered civil penalties allocated to the LWDA and 25% to employees affected by the violation.
Provisions necessary to bringing the PAGA complaint concern standing, notice and the statute of limitations. A mandatory prerequisite to filing a PAGA complaint is plaintiff’s submission of a notice of alleged violations to the employer and LWDA. Standing criteria encompasses the aggrieved employee as “someone ‘who was employed by the alleged violator’ and ‘against whom one of more violations was committed.’” (Id. at 939.) Notice must occur to the employer and the LWDA of the specific Labor ode provisions that are alleged to be violated and the facts and theories supporting the claim. Lastly, there is a one-year statute of limitations. The 65-ay notice period allowing the agency to investigate and issue a citation is not counted as part of the time for the limitations period to recover PAGA penalties. ( Ibid.)
The same general set of facts, the same injury and the same instrumentality or cause of injury need be present for the doctrine of relation back. Id. at 939. To fulfill the policy of the statute of limitations to put defendants on notice of the need to defend against a claim, the most important consideration is “whether the original pleading gave the defendant adequate notice of the claim.” (Id. at 940.)
USB’s argument was that Hutcheson was deputized under the PAGA statute to bring a particular action on behalf of LWDA covering the time defined by Hutcheson’s notice. The Court of Appeal noted that nothing in the PAGA statute explicitly prohibited Hutcheson from taking over Van Steenhuyse’s action; but USB noted for the Court that nothing explicitly permitted it either. (Id. at 941.) The Court of Appeal rejected USB’s argument that the language of the statute did not permit such a takeover reasoning such a position would undermine legislative objectives of strengthening Labor Code enforcement. The Court of Appeal, in line with other courts, also took a broader view and rejected the suggestion that a plaintiff’s notice under PAGA “established the temporal scope” of the plaintiff’s authority. (Id. at 942.)
USB also argued that Hutcheson’s taking over of Van Steenhuyse’s claims would work an impermissible assignment. The Court of Appeal rejected USB’s supporting authority on this claim drawing the distinction that where both Van Steenhuyse and Hutcheson “each have standing as aggrieved employees and the LWDA remains the real party in interest in this lawsuit regardless of the identity of the named plaintiff” then there is no issue of assignment. (Id. at p. 943.)
USB’s further argument that relation back would frustrate the notice requirement as a condition of filing suit was also rejected. The Court of Appeal determined the purposes of permitting the LWDA to allocate scarce resources to investigation and allowing an employer response to the LWDA to inform the agency’s decision had been met whereby “the LWDA and UBS have had notice of the alleged violations at issue in this case since Van Steenhuyse submitted his notice in December 2017.” (Id. at 943.)
According to the Court of Appeal, cases relied upon by USB were distinguishable and provided little support for its arguments. USB’s citation to a case that concluded that a later-noticed PAGA claims could relate back to the adequately noticed and alleged claim in an earlier complaint, even if the later-noticed claims alleged violations of different sections of the Labor Code, was unavailing. USB also argued that relation back would frustrate the PAGA notice requirement permitting more time to recover penalties than the LWDA would otherwise have. The Court of Appeal countered that relation back would not grant the LWDA or Hutcheson or any other aggrieved employees the potential for any more than they had under Van Steenhuyse’s original complaint. Reasoning if relation back did not apply then the punitive and deterrent force of PAGA would be weakened and that USB would avoid exposure to potential liability for civil penalties simply because Van Steenhuyse relinquished his role as a representative plaintiff, the Court of Appeal refused to bar the application of relation back as “contrary to PAGA’s goal of strengthening Labor Code enforcement.” (Id. at 944.)
The relation back doctrine applies, and Hutcheson can assert claims going back to December 22, 2016, if the trial court finds that the claims in the amended PAGA complaint rest on the same general set of facts, the same injury, and the same instrumentality as the claims in the original complaint. (Id. at 945.) The fact that Hutcheson’s PAGA notice was submitted after Van Steenhuyse’s is not a bar the application of the doctrine of relation back.