Lopez v. Friant & Assocs., LLC

15 Cal.App.5th 773

224 Cal.Rptr.3d 1

Eduardo LOPEZ, Plaintiff and Appellant,

v.FRIANT & ASSOCIATES, LLC, Defendant and Respondent.

A148849

Court of Appeal, First District, Division 1, California.

Filed September 26, 2017

Kingsley & Kingsley, APC, Eric B. Kingsley, Encino, and Ari J. Stiller for Plaintiff and Appellant.

Simpson, Garrity, Innes & Jacuzzi, PC, Paul V. Simpson,Sarah E. Lucas, and Arthur S. Gaus, South San Francisco, for Defendant and Respondent.

Margulies, J.Plaintiff Eduardo Lopez filed this action seeking recovery of civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code,¹ § 2698 et seq. ) for his employer's failure to include required information on itemized wage statements. The trial court granted summary judgment in the employer's favor on the basis that the uncontroverted evidence showed the employer's omission was not knowing or intentional within the meaning of section 226, subdivision (e)(1) (section 226(e)(1)). Because plaintiff's claim for civil penalties is governed by section 2699 and not section 226(e)(1), we reverse the judgment.

I. BACKGROUND

On April 1, 2015, plaintiff filed a complaint asserting a single cause of action for civil penalties under PAGA. Plaintiff alleged his employer, Friant & Associates, LLC (Friant), failed to include the last four digits of its employees' Social Security numbers or employee identification numbers on itemized wage statements, in violation of section 226, subdivision (a)(7) (section 226(a)(7)).

Friant brought a motion for summary judgment, arguing plaintiff could not prevail on his claim because (1) he did not suffer any injury resulting from a "knowing and intentional" violation of section 226, subdivision (a) (section 226(a)) as required by section 226, subdivision (e) (section 226(e)); and (2) the court should not award penalties for Friant's inadvertent wage statement error. Plaintiff opposed the motion, arguing he was not required to demonstrate injury to prevail on his PAGA claim, and that in any event, the evidence showed Friant's conduct was knowing and intentional. At the contested hearing, plaintiff also argued he was not required to show a "knowing and intentional" violation of section 226(a) to obtain civil penalties under PAGA.

The trial court granted summary judgment, concluding plaintiff must do more than show a violation of section 226(a), and must demonstrate "that the violation was ‘knowing and intentional,’ as that term has been interpreted by cases applying [section 226(e)(1) ]." Noting plaintiff had submitted no evidence to contradict the statement of Friant's accounting manager that she was not aware the last four digits of employees' Social Security numbers were not included on employees' pay stubs, the court determined plaintiff had failed to raise a triable issue of material fact regarding knowledge and intent. The court declined to address Friant's alternative argument that plaintiff failed to demonstrate he sustained actual injury as a result of the violation, and entered judgment in Friant's favor.

II. DISCUSSION

A. Standard of Review

Summary judgment is appropriate if "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ( Code Civ. Proc., § 437c, subd. (c).) We review a trial court's decision to grant summary judgment de novo. ( Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 716–717, 68 Cal.Rptr.3d 746, 171 P.3d 1082.) De novo review is also appropriate where, as here, the appeal involves a question of statutory interpretation. ( Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724, 122 Cal.Rptr.3d 331, 248 P.3d 1185 ; Barner v. Leeds (2000) 24 Cal.4th 676, 683, 102 Cal.Rptr.2d 97, 13 P.3d 704.)

B. Plaintiff's PAGA Claim

Plaintiff's sole cause of action seeks recovery of civil penalties under PAGA.

PAGA was enacted in 2003 to improve enforcement of Labor Code violations. ( Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 379, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ).) The legislation was a response to two related problems: (1) many Labor Code provisions were unenforced because they authorized only criminal sanctions and district attorneys tended to target other priorities, and (2) understaffed state enforcement agencies often lacked sufficient resources to pursue available civil sanctions. ( Iskanian , at p. 379, 173 Cal.Rptr.3d 289, 327 P.3d 129 ; Williams v. Superior Court (2017) 3 Cal.5th 531, 545, 220 Cal.Rptr.3d 472, 398 P.3d 69.) Citing the importance of adequate financing of labor law enforcement, declining staffing levels for labor law enforcement agencies, and a growing labor market, the Legislature declared it was "in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies were to retain primacy over private enforcement efforts." ( Arias v. Superior Court (2009) 46 Cal.4th 969, 980, 95 Cal.Rptr.3d 588, 209 P.3d 923, citing Stats. 2003, ch. 906, § 1.)

Under PAGA, an "aggrieved employee" may file a representative action "on behalf of himself or herself and other current and former employees" to recover civil penalties for violations of the Labor Code that otherwise would be assessed and collected by the Labor and Workforce Development Agency (LWDA). (§ 2699, subd. (a); Iskanian, supra, 59 Cal.4th at p. 380, 173 Cal.Rptr.3d 289, 327 P.3d 129.) For all provisions of the Labor Code for which a civil penalty is not specified, PAGA creates a default civil penalty. (§ 2699, subd. (f).) The civil penalties available under PAGA are in addition to any other remedies available under state or federal law. (§ 2699, subd. (g)(1).) Any civil penalty recovered is paid 75 percent to the LWDA and 25 percent to aggrieved employees. (§ 2699, subd. (i).) A prevailing employee is also entitled to reasonable attorney fees and costs. (§ 2699, subd. (g)(1).)

Plaintiff's PAGA claim is based on Friant's alleged noncompliance with section 226(a)(7). Section 226(a) requires employers to provide accurate, itemized wage statements to employees.² It sets forth nine elements that must be included in the wage statement, including, as relevant to plaintiff's claim under section 226(a)(7), the last four digits of an employee's Social Security number or employee identification number. (§ 226(a); Morgan v. United Retail, Inc. (2010) 186 Cal.App.4th 1136, 1143, 113 Cal.Rptr.3d 10.) During the litigation, the parties stipulated Friant had issued 5,776 itemized wage statements to plaintiff and other employees that failed to include such information.

Nonetheless, defendant prevailed on summary judgment because the trial court concluded plaintiff must show not only a violation of section 226(a), but the violation was "knowing and intentional" as provided in section 226(e)(1). Plaintiff argues the judgment must be reversed because he is not required to show either (1) a "knowing and intentional" violation or (2) "injury" within the meaning of section 226(e) to prevail on his PAGA claim. As we will explain, plaintiff is correct.

C. Section 226(e)

In determining whether the requirements of section 226(e)(1) apply to a PAGA action for violation of section 226(a), we apply well-settled principles of statutory interpretation. "Our fundamental task in interpreting a statute is to determine the Legislature's intent so as to effectuate the law's purpose." ( Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737, 21 Cal.Rptr.3d 676, 101 P.3d 563.) We start with the words of the statute, giving them their plain and ordinary meaning. ( Ibid . ) "If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute's purpose, legislative history, and public policy." ( Ibid . )

1. Plain Language

Looking first to the text of the statute, section 226(e)(1) provides: "An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000) and is entitled to an award of costs and reasonable attorney's fees." Section 226, subdivision (e)(2) specifies the meaning of "injury" within the subdivision. Friant argues, as it did below, that the language of section 226(e)(1) means plaintiff must demonstrate both an "injury" and a "knowing and intentional" violation of section 226(a) to succeed on his PAGA claim.

Friant's argument oversimplifies the task of statutory interpretation here and ignores how a PAGA claim differs from an employee's individual or class claim for damages or statutory penalties. In construing a statute, "We do not examine [its] language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment." ( Coalition of Concerned Communities, Inc. v. City of Los Angeles, supra, 34 Cal.4th at p. 737, 21 Cal.Rptr.3d 676, 101 P.3d 563.) As discussed above, PAGA is a type of qui tam statute that allows an aggrieved employee to recover civil penalties on behalf of the state. ( Iskanian, supra, 59 Cal.4th at p. 382, 173 Cal.Rptr.3d 289, 327 P.3d 129.) "The purpose of the PAGA is not to recover damages or restitution, but to create a means of ‘deputizing’ citizens as private attorneys general to enforce the Labor Code. [Citation.] Here, the relief is in large part ‘for the benefit of the general public rather than the party bringing the action.’ " ( Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 501, 128...