Being named as a defendant in a class action or Private Attorneys General Act (PAGA) lawsuit can be overwhelming, especially for a growing company. However, with planning, a company can minimize the impact of litigation on its existing operations and put forth the best defense. Here are five steps a company can take as part of this planning process, upon being notified of an existing lawsuit.
1. Contact employment counsel.
A lawyer who has experience in employment law and class actions should be contacted as soon as possible. There are certain deadlines that begin to run when a lawsuit is filed, and any delay could adversely affect the company’s defense. If the company does not know of an employment lawyer, a good start is to reach out to trusted advisors for recommendations, such as the company’s corporate lawyer or accountant. Wage and hour litigation, especially in California, is very unique, and it is recommended that the company utilize a lawyer that has experience in this area.
2. Obtain arbitration agreement (if any) signed by plaintiff, and plaintiff’s personnel file and time records.
If the company has implemented an arbitration agreement, it will be important to determine if the plaintiff has signed it, and if it bars the plaintiff from bringing a class and representative action. If there is a binding arbitration agreement in place, a motion to compel arbitration will likely be one of the first motions filed with the court.
In addition, the personnel file for the named plaintiff will need to be produced at some point in the case, and it should be provided to counsel as soon as possible. Also, the information in the personnel file will document any performance issues or other possible defenses the company has against the plaintiff’s allegations.
3. Review allegations with counsel to see if the safe harbor provision of the Private Attorney General Act (PAGA) could apply.
With the advice of counsel, there should be a review of both the allegations in the complaint, and if the plaintiff is seeking damages under PAGA, also the PAGA notice sent to the Labor Workforce & Development Agency (“LWDA”). PAGA provides the employer a short window of time (33 days from receiving the PAGA notice) to “cure” any alleged violations. If the employer cures the problems within the time period, the plaintiff cannot recover penalties under PAGA. Whether or not any items need to be cured, and the process for utilizing this safe harbor, should be reviewed closely with counsel.
4. Begin constructing a list of all employees who have worked in similar positions as the plaintiff during the last four years (which is likely the statute of limitations).
In California, the statute of limitations for most wage and hour class actions is four years from the date the complaint is filed. Therefore, the employees who have worked in the same or similar positions as the plaintiff will likely be the group of employees the plaintiff is seeking to represent in the class action. It is important to know how many of these employees there are. For example, if there are too few this could be a defense to class certification.
5. Gather employee handbooks and policies that were in effect during the last four years.
The litigation will likely revolve around what policies the company had in place, and whether the policies were legally compliant. The company’s counsel will have to review these policies and handbooks.