By: J.R. Riddell
In a rare win column victory for employers, a California appellate court recently held that trial courts have broad discretion to steeply discount the amount of penalties to be imposed under California’s Private Attorneys General Act (“PAGA”) for employer wage and hour violations. In Taduran v. Glidewell, the trial court slashed the amount of PAGA penalties by 99%, thereby reducing the potential maximum penalty of nearly $56 million to $516 thousand. The Taduran appellate court also upheld the trial court’s decision to significantly discount the amount of attorneys’ fees to award the employee’s attorneys – even though the employee was the prevailing party and therefore entitled to recover attorneys’ fees.
In the trial court, plaintiff Abraham Taduran brought a representative PAGA action against his former employer, Glidewell Dental Ceramics. Taduran sought nearly $56 million in civil penalties based on claims that his employer had committed multiple wage and hour violations (e.g., failure to pay proper minimum wages, overtime, premiums for non-compliant meal and rest breaks, non-compliant wage statements, and more). Following a bench trial, the trial court judge agreed that the employer engaged in multiple wage and hour violations. However, the judge concluded that the maximum penalties permitted under the Labor Code were grossly disproportionate to the underlying harm. Citing minimal unpaid wages, in addition to the employer’s prompt corrective actions, system changes, and willingness to compensate affected employees, the court drastically reduced the potential available penalties by 99%, and substantially trimmed the plaintiff’s requested attorneys’ fees. Plaintiff’s counsel appealed, arguing that the judge’s methodology to trim the PAGA penalties and to determine the attorneys’ fees award was improper.
The appellate court agreed with the trial judge and explained that the PAGA’s statutory language grants trial courts broad discretion to award less than the maximum potentially recoverable PAGA penalties if doing so would be unjust, arbitrary and oppressive, or confiscatory. The appellate court concluded that because the Labor Code does not specify that a judge must use any specific methodology to determine appropriate PAGA penalties, trial courts are free to use any reasonable method to reach a fair penalty figure. For example, the penalties can be adjusted downwards by a percentage or based on the number of aggrieved employees. The appellate court deferred to the judge’s decision because it was based on several case‑specific factors, including that the unpaid wages were minimal, the employer promptly corrected issues and implemented system changes, and the employer showed a willingness to make employees whole. Given those findings, cutting the penalties to roughly one percent of the theoretical maximum was reasonable and within the court’s discretion.
The appellate court also upheld an across‑the‑board reduction to plaintiff’s request for attorneys’ fees, which the attorneys were entitled to because they represented the prevailing party. The trial judge reduced the requested fees amount for various reasons, including the relative complexity of the issues presented and plaintiff’s success in relation to the fees. The appellate court confirmed that judges may consider the percentage‑of‑recovery as a reasonableness check when deciding whether to adjust fees upward or downward. Based on several factors, the court deemed it appropriate to reduce the requested fees from nearly $1.6 million to $733 thousand.
While Taduran is a positive development in appellate case law concerning the reduction of penalties and awardable attorneys’ fees, it also serves as a reminder that employers need to be vigilant in their efforts to comply with California’s evolving landscape of wage and hour requirements. Indeed, the Taduran decision underscore that non-compliance can be expensive even when a trial judge is willing to steeply discount penalties and attorneys’ fees.
