Filed 9/14/17 Zimmerman v. Wells Fargo Bank, N.A. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Gail Andrea Andler, Judge. Reversed.

Law Offices of Mark Yablonovich, Mark Yablonovich, Patrick Clifford, Christopher Pantel, and Richard Lee Hutchinson, for Plaintiff and Appellant.

Kading Briggs LLP, Glenn L. Briggs, Theresa A. Kading, and Nisha Verma, for Defendant and Respondent.

Joyce Zimmerman appeals from a judgment following entry of a summary judgment in favor of Wells Fargo Bank, N.A., on her claim for civil penalties under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA).[1] The trial court granted summary judgment based on Wells Fargo’s contention the general release of claims, given by Zimmerman as part of an employment separation agreement, included a waiver of her right to bring a claim under PAGA. Zimmerman argues the court erred because her waiver of claims against Wells Fargo extended only to whatever claims she had as an individual, and did not include her distinct right to act in a representative capacity under PAGA. We agree, although we base our conclusion on a somewhat different analysis than the one advanced by Zimmerman.

While the parties’ briefs focused on the language of Zimmerman’s waiver, and the applicability of Villacres v. ABM Industries, Inc. (2010) 189 Cal.App.4th 562 (Villacres), a case that analyzes the effect of an employee’s waiver of claims given in connection with the settlement of a class action lawsuit, this case involves a release given outside the litigation context, with no dispute being resolved. Consequently, we asked the parties to provide supplemental briefing addressing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 (Iskanian), which holds that an employee’s pre-dispute waiver of the right to bring a PAGA claim violates public policy.

In its supplemental briefing, Wells Fargo concedes Iskanian precludes an employee’s waiver of the right to bring a representative PAGA action before the employee is aware of the employer’s alleged Labor Code violations. And although Wells Fargo also contends Zimmerman must be deemed “aware” of any Labor Code violations that occurred before she signed her waiver, we reject that contention. In making it, Wells Fargo conflates an employee’s awareness of a violation with the mere occurrence of that violation. We also reject Wells Fargo’s claim Iskanian is irrelevant because Zimmerman waived any reliance on it in her opposition to the summary judgment motion. It was Wells Fargo’s burden, as the party seeking summary judgment, to demonstrate it was entitled to judgment as a matter of law. Satisfactorily addressing Iskanian was part of that initial burden. In any event, a party’s concession of a legal point is not binding on the appellate court. Applying Iskanian, we reverse the judgment.

FACTS

Zimmerman was employed by Wells Fargo as an underwriter. In August 2013, Wells Fargo terminated her employment as part of a group layoff. In connection with the layoff, Zimmerman executed a form agreement “regarding [her] separation from employment and salary continuation benefits under the Wells Fargo & Company Salary Continuation Pay Plan (the ‘Plan’).” The agreement provided that effective October 20, 2013, Zimmerman’s “active employment with [Wells Fargo] will end and [she] will become eligible for salary continuation pay, benefits, and leave under the Plan . . . .”[2]

The agreement also contained a “release of claims,” which provided, in pertinent part: “In consideration for the receipt of the terms and benefits described in this Agreement, to which you are not otherwise entitled, you hereby release the Company from all claims, liabilities, demands and causes of action, known or unknown, likely or unlikely, which you may have or claim to have against the Company, as a result of your employment with or separation from employment. This includes, but is not limited to, claims for wrongful termination, constructive discharge, termination in violation of public policy, claims for compensation or any other monies allegedly due to you from the Company, claims for additional severance pay or benefits, claims for breach of express or implied contract, any tort of any nature, claims for discrimination or harassment based on age, sex, race, religion, pregnancy, marital status, national origin, sexual orientation, and/or disability arising under federal, state, local, or common law . . . . [¶] This release does not extend to claims which as a matter of law cannot be waived. . . . ” (Italics added.)

In June 2014, Zimmerman filed a PAGA complaint against Wells Fargo, alleging the following violations: sections 510 and 1198 (unpaid overtime); sections 1194, 1197,b and 1197.1 (unpaid minimum wages); sections 226.7 and 512, subdivision (a) (unpaid meal period premiums); section 226.7 (unpaid rest period premiums); sections 201, 202, and 203 (wages not timely paid upon termination); section 204 (wages not timely paid during employment); and section 226, subdivision (a) (non-compliant wage statements). In her first amended complaint, Zimmerman alleged she provided timely notice of her proposed claims to the California Labor and Workforce Development Agency (LWDA) pursuant to section 2699.3, and that on June 9, 2014, she received a letter from LWDA indicating it did not intend to investigate the alleged violations.

Wells Fargo answered the complaint, and in June 2015, it filed a motion for summary judgment on the “stipulated legal issue” of “[w]hether [Zimmerman’s] claims on behalf of herself and ‘aggrieved employees’ under . . . [s]ections 2698, et seq. (‘PAGA’) are barred as a matter of law by the Agreement and Release of Claims signed by [Zimmerman]?” In its memorandum of points and authorities in support of summary judgment, Wells Fargo acknowledged Iskanian holds that public policy precludes a waiver of PAGA claims in a pre-employment agreement, but argued the case was “inapposite” because it “specifically allows for an employee to waive his or her right to bring a PAGA representative action after any alleged violations have already taken place.” (Bold omitted.) Instead, Wells Fargo relied primarily on Villacres, supra, 189 Cal.App.4th 562, a case addressing the effect of a release contained in a post-litigation settlement, to establish that a retrospective waiver of PAGA claims, encompassing “past alleged violations,” is acceptable, and is “legally distinguishable from an unlawful waiver of statutory rights.” (Id. at p. 591.)

Zimmerman opposed the motion, arguing the release she signed governed only her individual claims, not representative ones. In support of that argument she relied on Iskanian for the proposition PAGA claims are owned by the state, rather than by individual employees who have no “assignable interest” in them.

The trial court granted the summary judgment motion, concluding Villacres was controlling. The court explained “[a]s Plaintiff released her employer from liability for ‘all claims’ as a result of her employment, and her PAGA claims arise out of that same employment, the release she provided bars her from seeking PAGA penalties for same. [¶] Plaintiff therefore is also barred from pursuing PAGA claims in a representative capacity. Under [section] 2699, a PAGA claim must be brought by an aggrieved employee on behalf of himself or herself and other current or former employees. Since Plaintiff cannot assert any PAGA claim on her own behalf, she also cannot pursue such a claim in a representative capacity.”

DISCUSSION

I. The PAGA Law

“In September 2003, the Legislature enacted [PAGA] [citation]. The Legislature declared that adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws, that staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market, and that it was therefore 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. [Citation.] [¶] Under this legislation, an ‘aggrieved employee’ may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. [Citation.] Of the civil penalties recovered, 75 percent goes to the Labor and Workforce Development Agency, leaving the remaining 25 percent for the ‘aggrieved employees.’ [Citation.]” (Arias v. Superior Court (2009) 46 Cal.4th 969, 980-981, fn. omitted (Arias).)

A PAGA claim does not encompass—or even depend upon—an employee’s individual claim for damages against the employer. Indeed, a PAGA plaintiff need not even have suffered all of the wrongs alleged in the complaint. Instead, an “aggrieved employee” who can bring a PAGA claim is defined as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” (§ 2699, subd. (c), italics added.) This is because “an action to recover civil penalties ‘is fundamentally a law enforcement action designed to protect the public and not to benefit private parties.’” (Arias, supra, 46 Cal.4th at p. 986; Iskanian, supra, 59 Cal.4th at p. 381 [“The civil penalties recovered on behalf of the state under the PAGA are distinct from the statutory damages to which employees may be entitled in their individual capacities”].) Thus, an employee’s ability to assert individual damage claims would not affect the employee’s standing to bring a PAGA claim.

Before bringing a PAGA claim, the plaintiff must comply with the procedural requirements, “specified in [s]ection 2699.3.” (§ 2699, subd. (a).) And for the types of violations asserted in this case (see § 2699.5), section 2699.3 requires that the employee plaintiff notify LWDA (and the employer) of the proposed claim before filing it, thus allowing LWDA the option of investigating the alleged statutory violation(s) and taking appropriate action directly (§ 2699.3, subds. (a)(1), & (a)(2)). It is only after LWDA declines (expressly or impliedly) to pursue the alleged violations that the employee plaintiff can pursue the penalties on its behalf. (Arias, supra, 46 Cal.4th at pp. 980-981.)

II. Employee’s Waiver of a PAGA Claim

In her opening brief, Zimmerman focused primarily on the language of the waiver contained in her termination agreement, arguing it applied only to her individual claims for damages, and was not intended to include a release of PAGA claims owned by the state. She argued that Villacres, the case relied upon by the trial court, was distinguishable because it considered a broader release of claims, given as part of a settlement of class action litigation, and was governed by principles of res judicata.

Although Zimmerman cited Iskanian in her brief, she did so in support of her assertion that because a PAGA claim belongs to the state, rather than the employee who asserts it, it would not fall within the parameters of an ordinary release of claims given by an employee. She did not specifically rely on Iskanian’s statement “that an employee’s right to bring a PAGA action is unwaivable” (Iskanian, supra, 59 Cal.4th at p. 383), as a basis for reversal of the judgment. Consequently, we ordered the parties to provide us with supplemental briefing, “addressing whether [Iskanian], which concludes that ‘an employee’s right to bring a [. . . (PAGA)] action is unwaivable[,]’ compels reversal of the judgment in this case.”

In Iskanian, the Supreme Court considered whether a pre-employment arbitration agreement could operate as a waiver of the employee’s right to later assert a PAGA claim against the employer. (Iskanian, supra, 59 Cal.4th at p. 384.) The Supreme Court concluded it could not, explaining “A PAGA representative action is . . . a type of qui tam action. ‘Traditionally, the requirements for enforcement by a citizen in a qui tam action have been (1) that the statute exacts a penalty; (2) that part of the penalty be paid to the informer; and (3) that, in some way, the informer be authorized to bring suit to recover the penalty.’ [Citation.] The PAGA conforms to these traditional criteria, except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation. The government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit.” (Id. at p. 382.)

The court then pointed out that “[t]he unwaivability of certain statutory rights ‘derives from two statutes that are themselves derived from public policy. First, Civil Code section 1668 states: “All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” “Agreements whose object, directly or indirectly, is to exempt [their] parties from violation of the law are against public policy and may not be enforced.” [Citation.] Second, Civil Code section 3513 states, “Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.”’ [Citation.]” (Iskanian, supra, 59 Cal.4th at pp. 382-383.) Based on those statutes, the court concluded “an employee’s right to bring a PAGA action is unwaivable.” (Id. at p. 383.)

However, the court also acknowledged an exception to that rule of unwaivability. It stated that employees remain “free to choose whether or not to bring PAGA actions when they are aware of Labor Code violations. [Citation.] But it is contrary to public policy for an employment agreement to eliminate this choice altogether by requiring employees to waive the right to bring a PAGA action before any dispute arises. (Iskanian, supra, 59 Cal.4th at p. 383, italics added.)

Consequently, in our request for supplemental briefing, we asked the parties to address the following specific points: “(1) Whether Iskanian allows employees to waive their rights to bring PAGA actions before they are aware of the employer’s alleged Labor Code violations; (2) Whether there is undisputed evidence that appellant . . . Zimmerman was aware of respondent Wells Fargo’s alleged Labor Code violations when she executed her release in this case; and (3) Whether there is undisputed evidence that a dispute over Labor Code violations had arisen between Zimmerman and Wells Fargo before she executed her release in this case.”

In its supplemental briefing, Wells Fargo properly concedes the first point, agreeing Iskanian “holds that employees cannot waive their right to bring a representative PAGA claim prospectively, ‘before any dispute arises.’” (Bold and capitalization omitted.) Wells Fargo nonetheless claims Iskanian is inapplicable here because its prohibition against the waiver of PAGA claims applies only to those based on future Labor Code violations—i.e., wrongdoing that has not yet occurred. That was the situation Iskanian faced, as the waiver in that case was contained in a pre-employment agreement. Here, by contrast, Zimmerman signed her waiver at the end of her employment, and thus Wells Fargo contends any disputes about Labor Code violations must have already arisen by that time.

We disagree. The distinction Iskanian draws between waivable and non-waivable PAGA claims turns on whether the employee was aware of the alleged Labor Code violations and intended to resolve that disputed issue as part of the waiver. Not on whether the violation has occurred.

Specifically, Iskanian preserves employees’ “choice” to bring a PAGA claim or not, made “when they are aware of Labor Code violations,” while precluding employers from mandating a waiver of the right to “bring a PAGA action before any dispute arises.” (Iskanian, supra, 59 Cal.4th at p. 383, italics added.) Thus, what Iskanian prohibits is an employer mandated waiver of the employee’s right to bring a PAGA action based on Labor Code violations that are as yet unknown to the employee.

Wells Fargo also argues that despite Iskanian’s focus on preserving the employee’s freedom to “choose” whether to bring a PAGA claim when the employee is “aware of Labor Code violations” (Iskanian, supra, 59 Cal.4th at p. 383), it does not require the employee to have “subjective or actual knowledge” of those claims before waiving them. According to Wells Fargo, an “actual knowledge” restriction on the scope of an employee’s waiver would contravene “well established” law that enforces a party’s waiver of “unknown” claims as part of an agreement explicitly covering such claims. (See Winet v. Price (1992) 4 Cal.App.4th 1159, 1173.)

The argument is unpersuasive because the cases Wells Fargo cites address principles of contract interpretation, concluding that a broad release of claims will be enforced in accordance with its terms. Thus, if the parties’ agreement reflects the intention a waiver will cover unknown claims, that intention will be enforced. But the enforceability of PAGA waivers does not turn on the parties’ intentions or the language of their agreements. Instead, it is an issue governed by public policy, which will override the terms of the parties’ agreement. (Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601, 617 [“‘In California, private contracts that violate public policy are unenforceable’”].) And here, public policy precludes employers from extracting PAGA waivers from employees who are unaware a Labor Code violation has occurred, and in the absence of any existing dispute about it.

In this case, Wells Fargo offered no evidence suggesting Zimmerman was actually aware of the Labor Code violations she alleged as the basis of her PAGA claim—let alone that any dispute had arisen about them—at the time she signed the employment separation agreement containing the general release. Absent such proof, Iskanian precludes an enforceable waiver of Zimmerman’s right to bring a PAGA claim based on those alleged violations.

III. Zimmerman’s Alleged Waiver of Iskanian in This Case

Finally, Wells Fargo also claims Iskanian is effectively irrelevant in this case because Zimmerman eschewed reliance on it in her opposition to the summary judgment motion. The claim is unpersuasive. As explained in Y.K.A. Industries, Inc. v. Redevelopment Agency of City of San Jose (2009) 174 Cal.App.4th 339, it was Wells Fargo’s burden, as the party seeking summary judgment, to demonstrate it was entitled to judgment as a matter of law. Until it satisfied that initial burden, Zimmerman had no burden to persuade the court of anything: “The court [must] hold the moving party to its initial burdens of production and persuasion in demonstrating its entitlement to judgment as a matter of law on a particular basis. [Citations.] The court’s assessment of whether the moving party has carried its burden—and therefore caused a shift—occurs before the court’s evaluation of the opposing party’s papers. [Citations.] Therefore, the burden on the motion does not initially shift as a result of what is, or is not, contained in the opposing papers.” (Id. at p. 367.)

In this case, because Wells Fargo’s motion rested on the enforceability of the waiver included in Zimmerman’s employment separation agreement, it had the initial burden to satisfactorily address the impact of Iskanian on the scope of that waiver. In any event, a party’s concession of a legal point is not binding on the appellate court. (Desny v. Wilder (1956) 46 Cal.2d. 715, 729 [“This court, of course, is not bound to accept concessions of parties as establishing the law applicable to a case”]; Bell v. Tri-City Hospital Dist. (1987) 196 Cal.App.3d 438, 449, disapproved on other grounds in State of California v. Superior Court (2004) 32 Cal.4th 1234, 1244 [“counsel’s erroneous concession cannot and should not prevent this court from applying sound legal principles to the objective facts disclosed by the record”].)

Iskanian reflects and enforces our public policy with regard to the enforceability of an employee’s waiver of the right to bring a PAGA action. It has been fully briefed and must be applied in this case.

DISPOSITION

The judgment is reversed, and the case is remanded to the trial court. Appellant shall recover her costs on appeal.

O’LEARY, P. J.

WE CONCUR:

BEDSWORTH, J.

ARONSON, J.