Fee listed at $553,000 added up to hourly rate of $1,826, says court
In a decision that could be a welcome sign to employers worried about PAGA litigation fees, a California Superior Court judge held on to almost $2 million dollars in PAGA claim penalties because of what she called “extraordinary” lawyer fees.
GV Wire reported that a judgement involving alleged labor violations of a Fresno distribution center of The GAP was put on hold by judge Kristi Kapetan when she spotted a lawyer fee listed as $553,000. The amount was based on 33% of the tentative $1.7-million settlement and was charged by a PAGA (Private Attorney’s General Act) plaintiff lawyer.
“Applying the amount sought of $553,278 to the 303 attorney hours, the hourly rate would equate to $1,826,” Kapetan’s court statement read. “The court finds the rate sought as extraordinary, and therefore will not rely on a percentage approach.”
Before the judge’s intervention, workers involved in the class-action suit – which involved lunch break nonpayment and overtime – would have received between $9.31 and $11.42 for every week covered by the claim. Kapetan instead awarded the main plaintiff $10,000, and proposed paying the plaintiff lawyer $162,645, a rate of $700 per hour.
PAGA claims more prevalent after August change to Act
As reported in HRD on August 21, a new court decision has made it possible for “aggrieved” employees to arbitrate an individual PAGA claim against an employer, and still bring a representative action to civil court.
“That's hard for employers, because these PAGA cases are very costly in the Superior Court, and they are also very easy for plaintiffs to prove some kind of violation,” said Ted Bacon, labor and employment attorney with Frost Brown Todd. “Just the nature of the damages are so high – in order to fight it, you’ve got to spend a lot of money.”
Under the current PAGA law, an employee can make one PAGA individual claim, and if they lose that claim, they are not able to pursue a PAGA representative claim. They can, however, participate in a representative PAGA action for a different violation, he told HRD.
Lawyer recommendation for avoiding PAGA claims
A way for employers to potentially reduce PAGA litigation costs is by including a ”stay of the representative action pending the individual claim” in employee arbitration agreements, Bacon said.
This clause means the employee agrees that if they decide to initiate a PAGA claim, they will arbitrate an individual claim first, and wait until it is resolved before moving forward with a potential representative action in court.
“As employers, we don't want to be fighting two battles: one in the Superior Court and one in arbitration,” said Bacon. “We'd rather try to fight the battle against him as an individual, and if we win that, great, we don't have any worry about that individual going forward in Superior Court. If we lose it, or we decide we're going to lose it, then we can wrap the whole thing up and sell it. But we're not spending hundreds or tens of thousands of dollars in court, fighting two battles at the same time.”
Arbitration agreements should also include severability clauses, he said, ensuring that any parts of the agreement found to be invalid in the future will not negate the entire agreement.
