Employment 2025

USA – CALIFORNIA Law and Practice Contributed by: William C. Martucci, Laura M. Booth, Ashley N. Harrison and Carrie A. McAtee, Shook, Hardy & Bacon LLP

Labor Code Violation Claims Under California law, employees who wish to bring a claim for violations of the Labor Code also must exhaust their administrative remedies before filing a lawsuit in state court. To exhaust their remedies, employees must first file with the Labor and Work - force Development Agency (LWDA), depending on the alleged violation. Some common divisions within the LWDA are the California Division of Labor Standards Enforcement (aka the Labor Commissioner’s Office), Cal-OSHA, and the Division of Workers Compensa - tion. DLSE adjudicates wage claims on behalf of workers who file claims for non-payment of wages, overtime, or vacation pay, pursuant to California Labor Code, Sections 96 and 98. DLSE deputies hold informal conferences between employers and employees to resolve wage disputes. If a matter cannot be resolved at the informal conference, an administrative hearing is held to make a final determination on the matter. Notably, employees who seek to bring claims under the Private Attorneys General Act (PAGA) must first exhaust their administrative remedies with the LWDA. Collective Activity Claims Claims related to activity protected by the NLRA or a collective bargaining agreement are subject to the requirements of the NLRA. An employee claiming to have been subject to an unfair labour practice must file a charge with the NLRB and go through their administrative process. Employees covered by a CBA typically must seek relief through their union or other arbitration procedures set out in the CBA. 9.2 Alternative Dispute Resolution California will enforce arbitration provisions in employ - ment contracts and in the employment context. How - ever, there are a few restrictions. First, the arbitration agreement cannot be unconscionable (ie, exces - sively one-sided or procedurally unfair) or require the employee to waive his or her ability to file com -

plaints with the DFEH or EEOC. Second, California law requires the arbitration agreement to meet certain minimum standards to be enforceable. These stand - ards are: • neutral arbitrators; • adequate discovery; • written award; • all types of relief offered by a court; and • no additional costs beyond those required by a court. Provided the arbitration agreement meets these mini - mum standards and is not unconscionable, California courts will typically enforce it. It is important to note that California has grown increasingly skeptical of arbitration agreements in the employment context. The California Assembly passed AB 51, which sought to limit mandatory arbitration agreements for employees. On 1 January 2024, a fed - eral court enjoined state officials from enforcing AB 51. But the legal environment in California continues to trend towards viewing arbitration agreements in the employment context as suspicious. 9.3 Costs Generally, California follows the “American Rule”, which requires that each party bear its own costs in litigation. However, many statutes in the employ - ment context provide for fee-shifting or the award of attorney’s fees by the prevailing party. For example, PAGA cases allow for the award of attorney fees, if the employee prevails. Employees can also recover attorney fees in successful claims alleging discrimina - tion, harassment, or retaliation under FEHA or federal counterparts (ADA, Title VII, etc). California courts commonly use the “Lodestar” meth - od to determine attorney fees for a prevailing party. The Lodestar is calculated by multiplying the reason - able number of hours spent on the case by a reason - able hourly rate.

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