PAGA Penalties Don’t Require Specific Method for Reduction

The Labor Code does not mandate any particular method for reducing a maximum civil penalty under the Private Attorneys General Act (PAGA), a California appellate court recently held.

Abraham Taduran sued his former employer, James R. Glidewell, Dental Ceramics, Inc., alleging a PAGA claim for various Labor Code violations.

The trial court awarded a total of $515,955 in civil penalties for four Labor Code violations: wage statement violations, rest period violations, overtime wage violations and bonus pay miscalculations. The total amount reflected a reduction from the maximum penalties available.

Taduran followed up with a motion for attorney fees and costs. The trial court awarded $733,440 in attorney fees and $98,138.21 in costs, less than the $1,571,658.75 Taduran asked for.

Appealing both the civil penalties as well as the attorney fees and litigation cost awards, Taduran acknowledged that the trial court may reduce the maximum amount of civil penalties, but argued that the court was required to apply the reduction on a per-pay-period basis because PAGA imposes civil penalties on a per-pay-period basis.

“We disagree,” the court wrote. “Section 2699, subdivision (e)(2) does not provide a formula for reducing the maximum civil penalty; it merely states that the court may award a ‘lesser amount.’”

The initial step of calculating the maximum civil penalty is set forth in section 2699, subdivision (f), which provides for calculation on a per-pay-period basis, the court said. Section 2699, subdivision (f) does not reference reduction of a civil penalty, however, let alone provide any mandatory formula for reduction.

“Thus, after calculating the maximum civil penalty on a per-pay-period basis, the trial court is not precluded from using any reasonable method to reduce that amount, including applying a reduction on a percentage, per-pay-period or per-employee basis,” the court held.

Taduran countered that only a per-pay-period method satisfied PAGA’s purpose of deterrence, but the court again disagreed, finding sufficient deterrence in the statute.

Nor was the court persuaded by Taduran’s efforts to increase his attorney fee and cost awards, finding no abuse of discretion by the trial court. One factor supported an upward adjustment—the contingency risk—but multiple factors supported a downward adjustment, including the complexity of the legal issues, the relative success and the upward adjusted billing rates “baked” into the lodestar.

The court also rejected Taduran’s challenge to the relative success factor, noting that in representative actions to vindicate public rights, such as a PAGA case, “the percentage of recovery can be used to support a negative multiplier.”

To read the opinion in Taduran v. James R. Glidewell, Dental Ceramics, Inc., click .

Why it matters: According to the appellate court’s decision, trial courts have broad discretion when deciding how to reduce a PAGA civil penalty, as the statute does not provide a formula and simply allows the court to award a “lesser amount.”