Judge Bruce G. Iwasaki, Case Number: 24STCV03456, Date: 2025-02-06 Tentative Ruling

This action arises from an employer-employee dispute involving Labor Code violations. On February 9, 2024, Plaintiffs Li Zhang and Jun Fang Zhang (Plaintiffs) filed a Complaint against their former employers, Defendants Cool Pai Inc., CP Shawn, Inc., and Conglun Shao.

On September 4, 2024, Plaintiffs filed a First Amended Complaint containing causes of action for (1.) violations of Labor Code §§ 218.5, 218.6, 558, and 1194 for unpaid wages, (2.) violation of Labor Code §§ 218.5, 218.6, 558 and 1194 for unpaid overtime, (3.) violations of Labor Code §§ 203, 218.5, 218.6, 558, and 1194 for waiting time penalties, (4.) violations of Labor Code § 226.7 for failure to provide rest periods, (5.) violations of Labor Code § 226.7 for failure to furnish timely and accurate wage statements, (6.) violation of Business and Professions Code § 17200, (7.) wrongful termination, (8.) breach of contract, and (9.) money had and received.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading by raising questions of law. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Defendants demur to the FAC on the grounds that Plaintiffs failed to allege exhaustion of their administrative remedies with respect to their Private Attorney General Act (PAGA) claims.

Plaintiffs bring this action in their individual capacity and collectively, on behalf of other aggrieved employees pursuant to PAGA. (FAC p. 1:27-2:6.)

Defendants argue the pleading fails to allege facts showing Plaintiffs exhausted their administrative remedies with respect to these PAGA claims.

Labor Code Section 2699.3 sets forth the obligations for a plaintiff bringing PAGA claims under Labor Code section 2699, subdivisions (a) or (f). The statutory provisions make clear that the required administrative process differs depending on the kind of violations the employee alleges.

Under subdivision (a), “[a] civil action by an aggrieved employee ... alleging a violation of any provision listed in Section 2699.5 shall commence only after” the employee has given the Labor and Workforce Development Agency (LDWA) and the employer notice (in the approved form) “of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” The agency then decides whether to investigate the violations on its own and must provide notice of its decision to the employee and the employer. If the agency doesn't intend to investigate or doesn't provide the employee any notice within a specified period, the employee may file a PAGA action under section 2699. (Lab. Code, § 2699.3, subd. (a).)

Under subdivision (b), “[a] civil action by an aggrieved employee ... alleging a violation of any provision of Division 5 (commencing with Section 6300) other than those listed in Section 2699.5 shall commence only after” the employee has given the Division of Occupational Safety and Health (division) and the employer notice (in the approved form) of the specific provisions of Division 5 alleged to have been violated, “including the facts and theories to support the alleged violation.” (Lab. Code § 2699.3, subd. (b).) The division is then required to investigate or inspect the violation and decide whether to issue a citation. (Lab. Code, § 2699.3, subd. (b)(2)(A).) “If the division issues a citation, the employee may not commence an action pursuant to Section 2699. The division shall notify the aggrieved employee and employer in writing within 14 calendar days of certifying that the employer has corrected the violation.” (Lab. Code, § 2699.3, subd. (b)(2)(A)(i).) The employee may file a lawsuit if the agency doesn't issue a citation in the proscribed period. (Lab. Code, § 2699.3, subd. (b)(2)(A)(ii).) However, the division may permit long-term abatement periods and the employee may not bring a civil lawsuit “during the period that an employer has voluntarily entered into consultation with the division to ameliorate a condition.” (Lab. Code, § 2699.3, subd. (b)(3)(A) & (B).)

Finally, under subdivision (c), the process is different because it includes a short safe harbor period for the employer to cure any violations. First, this provision applies explicitly to claims of “violation of any provision other than those listed in Section 2699.5”—to which subdivision (a) applies—“or Division 5 (commencing with Section 6300)”—to which subdivision (b) applies. (Lab. Code, § 2699.3, subd. (c).) As with subdivision (a), an employee may commence a PAGA claim under subdivision (c) only after giving the LDWA and the employer notice “of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” (Lab. Code, § 2699.3, subd. (c)(1)(A).)

Based on the foregoing, in order to bring any PAGA claim for any of the alleged Labor Code violations, Labor Code Section 2699.3 explicitly requires that any PAGA claim must first be filed with the LWDA.

In opposition, Plaintiffs confusingly argue that they have alleged compliance with the administrative procedures “under FEHA” (Opp., 2:8-10, italics added.), not PAGA. Moreover, Plaintiffs aver they obtained a right to sue letter under unspecified California regulations (no Title is identified) from the “EEOC” – a federal agency that does not enforce state wage and hour laws.[2] This allegation fails to allege compliance with administrative exhaustion requirements.

Further the opposition argues that Defendants’ demurrer requires that Plaintiff “prove” compliance with pre-filing requirements. (Opp., 413-18.) Not so. Rather, Defendants argue only that the FAC fails to allege compliance with this necessary, pre-filing condition. That is, the demurrer properly attacks the sufficiency of the pleading.

In reviewing the FAC, it is true that Plaintiffs have failed to allege compliance with this necessary element of a PAGA claim. (Tan v. GrubHub, Inc. (N.D. Cal. 2016) 171 F.Supp.3d 998, 1011 [permitting plaintiffs to amend PAGA claim to plead compliance after failing to allege administrative exhaustion in their complaint]; Varsam v. Laboratory Corp. of America (S.D. Cal. 2015) 120 F.Supp.3d 1173, 1182-1183 [granting plaintiff leave to amend complaint to allege facts establishing that PAGA's exhaustion requirements had been met].) On this ground, the demurrer to the representative PAGA claims is well taken.

[1] By its terms the demurrer does not differentiate the PAGA claims from common law theories such as breach of contract and money had and received, nor between individual Labor Code violations and the representative PAGA claims. The exhaustion argument Defendants advance does not apply to these non-PAGA claims. Accordingly, the Court treats the demurrer as applying only to the extent Plaintiff claims to bring a representative PAGA action. Defendants are advised to exercise greater care in their court papers.

[2] These obviously erroneous allegations create confusion. Further, the Court takes a dim view of Plaintiffs’ decision to title their submission “Plaintiffs’ Opposition to Defendants’ Frivolous Demurrer.” Such conduct is unprofessional.

Judge Bruce G. Iwasaki

Department 58