Recent legal decisions and amendments highlight significant shifts in the landscape of labor law, affirming and expanding employers’ rights in California, while benefiting personally aggrieved employees as well. In EMD Sales, Inc. v. Carrera, the Supreme Court clarified the standard of proof employers must satisfy when defending against Fair Labor Standards Act (FLSA) overtime claims. In Leeper v. Shipt, Inc., the California Court of Appeal addressed arbitration requirements in the context of the Private Attorney General Act (PAGA). Meanwhile, changes to the PAGA framework itself took effect on January 1, 2025, with SB 92 introducing amendments that refine the standing requirements, penalties, and litigation procedures, offering new protections and opportunities for both employees and employers. Employees and Employers alike can contact MNK Law for advice regarding these or any other legal matters.
EMD Sales, Inc. v. Carrera: U.S. Supreme Court eases the burden of proof for employers
In EMD Sales, Inc. v. Carrera, 604 U.S., 2025 WL 96207 (2025), the Supreme Court addressed the standard of proof an employer must meet when defending against claims under the Fair Labor Standards Act (FLSA). In this case, several sales representatives sued EMD for failing to pay overtime, and EMD argued that the employees were exempt under the FLSA’s outside-sales exemption. The lower courts had ruled that EMD was required to prove its case using the “clear-and-convincing” evidence standard, which is stricter than the usual “preponderance-of-the-evidence” standard applied in most civil cases. The Supreme Court reversed the Fourth Circuit’s decision, ruling that the preponderance-of-the-evidence standard should apply, unless a statute, the Constitution, or specific situations requiring exceptional government action demand a higher standard. This ruling aligns with established law in the Ninth Circuit, as seen in Coast Van Lines, Inc. v. Armstrong, 167 F.2d 705 (9th Cir. 1948). The burden of proof for employers in defense is affirmed as a lower standard.
Leeper v. Shipt, Inc.: California Court of Appeal further affirms the validity of arbitration agreements
In Leeper v. Shipt, Inc., 2024 WL 5251619 (Cal. Ct. App. 2024), Christina Leeper entered into an independent contractor agreement with Shipt, Inc., a subsidiary of Target Corporation, which included an arbitration agreement requiring her to arbitrate any personal or individual claims. However, Leeper filed a “representative” lawsuit against Shipt and Target, seeking only penalties for alleged violations of the California Labor Code’s Private Attorneys General Act (PAGA), specifically for the benefit of others, not herself. Leeper argued that because her claim was not based on individual harm, it should not be compelled to arbitration. The trial court agreed and denied the motion to compel arbitration.
The Court of Appeal reversed this decision, holding that under Labor Code section 2699, subdivision (a), a PAGA action always includes both an individual and a representative component. The court emphasized that the legislature intentionally used the word “and” instead of “or” when drafting the statute, signaling that both types of claims must be included in any PAGA action. As a result, the court directed the trial court to grant Shipt’s motion to compel arbitration and to stay the representative portion of the PAGA claim until the arbitration outcome was determined. This decision was also consistent with Huff v. Interior Specialists, Inc., 2024 WL 5231468 (Cal. Ct. App. 2024), which found that a trial court improperly failed to stay a representative action pending arbitration. This recent decision is generally more beneficial for employers because it further affirms the enforceability of arbitration agreements.
SB 92: Amendments to the Private Attorney General Act
The Labor Code Private Attorney General Act (PAGA) of 2004 allows employees to file civil lawsuits on behalf of themselves and other workers for Labor Code violations, seeking penalties typically collected by the Labor and Workforce Development Agency (LWDA). The recent changes introduced by SB 92 bring significant modifications to the PAGA framework, offering relief to employers who have faced frequent and sometimes questionable claims. The revisions also enhance penalties for employers found guilty of malicious, fraudulent, or oppressive behavior. Key changes include:
Employees are now restricted to pursuing claims only for Labor Code violations that directly impact them, as opposed to the previous provision, that allowed them to pursue claims for violations they did not personally experience.
Employers now have a broader range of Labor Code violations they can address in response to a pre-suit PAGA notice, providing an opportunity to resolve issues before litigation begins.
The law now explicitly allows courts to limit the scope of claims presented at trial, ensuring cases can be managed effectively.
Lastly, civil penalties are capped in certain situations. However, there have been increases in penalties for employers who violate labor laws with malicious, fraudulent, or oppressive intent. Additionally, the portion of recovered penalties allocated to employees has increased from 25% to 35%.
