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Federal Removal Unlikely in PAGA Based Actions

September 24, 2013 Legal Team

The trend is for plaintiffs’ attorneys to file representative actions for violation of the Private Attorneys General Act (“PAGA”), pursuant to Labor Code section 2698, et seq., rather than class actions.  However, the Ninth Circuit Court of Appeal was presented with an issue of the first impression – whether civil penalties sought under PAGA could be aggregated to meet the amount in controversy of $75,000 for removal under diversity.

In Urbino v. Orkin Services of California, Inc., the appellate court clarified that civil penalties sought under PAGA cannot be aggregated for purposes of removal based on diversity grounds.  The plaintiff in Urbinofiled a representative action against his former employers Orkin Services of California, Inc., and Rollins, Inc. asserting claims for failure to pay overtime, failure to pay vacation wages, failure to provide meal periods and failure to provide accurate itemized wage statements.

Defendants removed the action to federal court citing diversity as the basis for jurisdiction.  In support of removal, defendants presented evidence that over 800 employees would be affected in the action and aggregating their claims would total $400,000, which satisfies the amount in controversy requirement.

The plaintiff filed a motion to remand claiming his individual claims should be the only amount the court should consider in determining the amount in controversy.  The plaintiff’s individual claims totaled only $11,000, which is insufficient to meet diversity jurisdiction.  Nevertheless, the trial court denied the plaintiff’s motion to remand allowing penalties to be aggregated among the plaintiff and other aggrieved employees.

In response, Plaintiff filed an appeal.  On appeal, the Ninth Circuit Court found that the right to recover for violations under the California Labor Code is held individually.  Applying this rationale, the appellate court ruled that PAGA claims cannot be aggregated to meet the amount in controversy requirement under diversity.

This decision yields a significant victory for plaintiffs’ wage and hour attorneys because it forces the defendant employer to litigate PAGA actions in state court, a friendlier forum for employees.