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PAGA Win for Employers | LWDA Responsible for Prevailing Employer’s Costs

In Alameda County, Hobby Lobby Stores, Inc. won a significant victory against the California Labor and Workforce Development Agency (CLWDA) and recovered almost $125,000 in costs. However, on January 19, 2024, the plaintiff filed an appeal, which has major implications for all employers who are facing PAGA litigation. The trial court’s decision marks a significant shift in the legal landscape and highlights the court’s recognition that an employer can recover costs in a lawsuit.  Although the trial court’s order was well-reasoned, the outcome of the appeal is crucial to watch as it has the potential to solidify this victory for employers if the Court of Appeal upholds the lower court’s ruling.

The case focused on allegations that Hobby Lobby denied suitable seating to retail workers, resulting in a complete victory for Hobby Lobby in a three-week trial. Despite the judgment favoring Hobby Lobby as the prevailing party, the plaintiff contested the cost recovery.  As a result, the employer filed a motion based on PAGA’s attorney fee and cost provision as an exception to California’s general cost-shifting rule.  Hobby Lobby countered, asserting that PAGA allows a prevailing employer to recover costs and suggesting that the CLWDA should bear costs in an unsuccessful PAGA lawsuit. On the 28th of December 2023, the trial court issued a 35-page order, unequivocally rejecting the arguments presented by the Department of Labor Standards Enforcement (DLSE) and upholding Hobby Lobby’s claims. This ruling is noteworthy precedent, as it represents the first time in which the CLWDA has been held accountable for the costs of a prevailing employer in a PAGA case.

Following the trial court’s order, the CLWDA chose not to submit an amicus brief to the Appeals Court and instead involved the DLSE for intervention. The DLSE supported the plaintiff’s argument against cost recovery for employers in a failed PAGA action, advocating for a “one-way cost-shifting” provision in PAGA’s fee and cost rules, similar to California’s minimum wage laws. Hobby Lobby, countering with evidence of the CLWDA’s substantial civil penalties amounting to approximately $375 million over the last three fiscal years, argued that the CLWDA, as the real party in interest, should bear costs if the employer prevails.

This appeal is certainly one to watch! Chauvel & Glatt will be monitoring this case and update all employers as soon as a ruling comes out later this year.

This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute legal advice.  For information on your particular circumstances, please contact  Chauvel & Glatt at 650-573-9500 for legal assistance near you. (photo credit: depositphotos.com).

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