Under the Labor Code Private Attorneys General Act (PAGA), an aggrieved employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. Iskanian v. CLS Transp. L.A., LLC (2014) 59 Cal.4th 348, 380.

The PAGA is “a procedural statute allowing an aggrieved employee to recover civil penalties—for Labor Code violations—that otherwise would be sought by state labor law enforcement agencies.” Amalgamated Transit Union, Local 1756, AFL-CIO v. Super. Ct. (2009) 46 Cal.4th 993, 1003. The statute provides a mechanism for private enforcement of Labor Code violations for the public benefit. See Arias v. Super. Ct. (2009) 46 Cal.4th 969, 986.

To incentivize employees to bring PAGA actions, the statute provides aggrieved employees 25 percent of the recovered civil penalties. Lab. Code, § 2699(i). The remaining 75 percent is distributed to the Labor and Workforce Development Agency (LWDA) “for enforcement of labor laws and education of employers and employees about their rights and responsibilities under [the Labor Code].” Lab. Code, § 2699(i).

A superior court must review and approve any PAGA settlement. Lab. Code, § 2699(5)(1)(2). The proposed settlement must be submitted to the LWDA at the same time it is submitted to the court. Lab. Code, § 2699(i).

Federal district courts addressing this issue have recognized that “neither the California legislature, nor the California Supreme Court, nor the California Courts of Appeal, nor the California Labor & Workforce Development Agency (“LWDA”) has provided any definitive answer” as to what the appropriate standard is for approval of a PAGA settlement. Flores v. Starwood Hotels & Resorts Worldwide, Inc. (2017) 253 F.Supp.3d 1074, 1075. Moreover, in the absence of any governing standard, Federal courts evaluating PAGA settlements have approved PAGA settlements upon a showing that the settlement terms are “fundamentally fair, adequate, and reasonable in light of PAGA’s policies and purposes.” Flores v. Starwood Hotels & Resorts Worldwide, Inc. (2017) 253 F.Supp.3d 1074, 1075.

Additional factors that are useful to consider include the strength of a plaintiff’s case, the risk, expense, complexity and likely duration of further litigation, the amount offered in settlement, the extent of discovery completed, and the experience and views of counsel. Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 128.

Other courts assessing the terms of a PAGA settlement for the same purpose have found that the risks posed by the courts discretionary authority to reduce an award of PAGA penalties when it would be “unjust, arbitrary and oppressive, or confiscatory” to impose the full amount may be reasonable and justifiable grounds for approving a settlement payment that is lower than the maximum PAGA penalties that may possibly accrue at trial. Cotter v. Lyft, Inc. (2016) 193 F.Supp.3d 1030, 1037. In addition, the court finds that the imposition of civil penalties as set forth in the Settlement and Release will likely have the effect of substantially deterring Defendants and other California employers from committing similar unlawful contact, as well as, protect workers from unlawful employment and working conditions in consistence with the public policies underlying the PAGA. Iskanian v. CLS Transportation L.A., LLC (2014) 59 Cal.4th 348.

Courts, however, have held that “an employee who, on behalf of himself and other employees, sues an employer under the unfair competition law for Labor Code violations must satisfy class action requirements, but that those requirements need not be met when an employee's representative action against an employer is seeking civil penalties under the Labor Code Private Attorneys General Act of 2004.” Arias v. Super. Ct. (2009) 46 Cal.4th 969, 975.