Zhou v. Chai

Background

This representative action was brought under California’s Private Attorneys General Act (PAGA). The plaintiffs sought approval of a settlement resolving PAGA penalty claims concerning alleged minimum-wage violations involving three cooks, overtime violations involving three cooks, and inaccurate itemized wage statements involving nine former employees.

The proposed settlement provided for $5,475 in PAGA penalties. Under the statute, $4,106.25, or 75%, would go to California’s Labor and Workforce Development Agency, and $1,368.75, or 25%, would be distributed among the employees covered by the proposed settlement agreement. The agreement defined those employees as people who worked for the defendants from July 25, 2020, through December 6, 2022.

Court’s analysis

The court explained that it could approve the settlement only if the motion provided enough information to determine whether the settlement was fair and adequate in light of PAGA’s purposes and the parties’ litigation risks.

First, the plaintiffs’ calculations of the relevant number of pay periods and the proposed PAGA period had the same problems identified in an earlier order denying part of the plaintiffs’ summary-judgment motion. The motion did not clearly show whether the calculations excluded penalties extending beyond an employee’s termination, and it did not tabulate the number of employees and pay periods adequately.

Second, the plaintiffs proposed reducing the maximum PAGA liability for the minimum-wage and overtime claims by 95%. They cited proof-related questions and the earlier denial of summary judgment on the PAGA claims, but the court found that explanation insufficient. In particular, the motion did not discuss the significance of an earlier discovery-sanctions order that included factual findings in the plaintiffs’ favor.

Third, the motion did not identify the defendants’ maximum PAGA exposure for the wage-statement claim. It also did not sufficiently justify limiting the penalty to one $250 penalty per employee instead of addressing the statute’s $1,000 penalty for subsequent violations. The court found that the plaintiffs’ references to the omissions as technical and to the restaurant having been sold did not adequately explain how the proposed reduction served PAGA’s purposes.

Disposition

The court DENIED the plaintiffs’ motion for approval of the PAGA settlement without prejudice. The plaintiffs may file a renewed motion within 30 days if they address the identified deficiencies and explain why the settlement should be approved, including why the proposed discounts are appropriate. If they do not file a renewed motion within 30 days, the parties must file a joint status report within 45 days proposing how the litigation should proceed. The court also VACATED the hearing scheduled for May 8, 2025.