July 15, 2021

Ninth Circuit Reverses PAGA Ruling

On May 29, 2021, the Ninth Circuit Court of Appeals issued a significant ruling in Magadia v. Wal-Mart Associates, Inc. Walmart was sued in 2016 under the Private Attorneys General Act (PAGA) by former employee Roderick Magadia alleging violations of California Labor Code wage statement and meal period laws. The allegations included hyper-technical violations relating to: 1) failure to provide adequate information on wage statements regarding applicable rates of pay and hours worked; 2) failure to provide compensation for missed meal periods; and 3) failure to provide applicable dates of pay on the employee’s final wage statement.

The Court’s reversal of the $102 million judgment against Walmart has important implications for California wage and hour litigation.

Key Aspects of the Court’s Reversal

PAGA authorizes aggrieved employees (e.g., those who allege personal harm based on one or more Cal. Lab. Code violations) to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California, for Labor Code violations. A key question in Magadia was whether a PAGA plaintiff – not directly harmed by the violation(s) alleged – has standing to pursue such claims on behalf of other aggrieved employees.

Prior California appellate court rulings have suggested an aggrieved employee may have standing to pursue PAGA based claims not only for violations they themselves have experienced, but also other alleged violations for which they suffered no direct harm. In opposition to these prior rulings, the Ninth Circuit found Magadia lacked standing to bring his meal period violation claim because he had suffered no direct harm. This finding is likely to have far reaching implications as it may serve to limit standing in future PAGA matters where the plaintiff has suffered no direct harm.

Another key aspect of this case is the Court’s reversal of the lower court’s decision on Magadia’s hyper-technical wage statement claims.[1] Magadia alleged Walmart’s failure to display the rate of pay and hours worked regarding its bonus overtime adjustment calculation violated the requirements of Cal. Lab. Code section 226.[2] He also alleged a similar violation for Walmart’s alleged failure to list the applicable dates of the pay period on his final pay wage statement.

Disagreeing with the lower court’s ruling, the appellate court determined that Walmart’s bonus adjustment was not an adjustment made in the “current pay period” but a retro adjustment for payments during past pay periods and therefore did not violate Section 226. Additionally, because Walmart had provided Magadia with a final wage statement at the end of the normal semimonthly pay period which listed the pay period dates and complied with Section 226, the fact this information was omitted from his final wage statement did not technically violate the statute. 

The Court’s failure to uphold such hyper-technical violations provides important guidance that may limit the scope of such technical wage statement claims in the future.

Overall, this case serves as a stark reminder of the potential for high penalties in PAGA matters. It also evidences the court’s discretion to reduce such penalties if it finds them to be unjust, arbitrary, oppressive, or confiscatory. However, the fact remains that even hyper-technical violations can cost millions. Employers should conduct periodic audits of its wage and hour practices to ensure compliance and reduce risk.

Growers seeking further information about complying with California wage and hour laws should contact Western Growers.

[1] It is important to note that Magadia was paid all money owed (e.g., overtime bonus and final pay).

[2] Cal. Lab. Code section 226 requires employers to provide an accurate itemized written statement showing…”all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee…”