In a continuing attempt to clarify the unfair competition laws – namely, Business & Professions Code Section 17200, et seq. (“UCL”), and Labor Code Section 2698, et seq., the Private Attorney General Act (“PAGA”) – the California Court of Appeal recently provided a small safe haven for employers from the class-action storm.

In Amalgamated, Local 1756 v. Superior Court, Case No. B191879 (February 28, 2007), the Second District Court of Appeal held that an individual’s potential to sue in a representative capacity, as conferred under the UCL and PAGA, may not be assigned to a third party. Furthermore, the UCL, as amended by Proposition 64, requires that representative claims may be brought only if the injured claimant satisfies the procedural requirements applicable to class-action lawsuits.

In Amalgamated, two labor unions representing mechanics and transit operators, along with 17 current and former union members, filed a lawsuit against several transit company employers. The plaintiffs alleged that defendants failed to provide legally required meal and rest periods to their employees. The labor unions brought claims not only on behalf of those individuals who had assigned their rights to the unions, but in a representative capacity on behalf of those union members whom the defendants currently or previously employed. Upon submission of briefs by the parties, the trial court ruled the unions did not have standing to sue for violations of the UCL or to recover civil penalties under PAGA, prompting plaintiffs to file a petition for a writ of mandate.

Denying the petition for extraordinary relief, the appellate court concluded that while individuals could assign their rights to recover allegedly unpaid wages to the unions, they could not also assign their potential to sue in a representative capacity. The court held that an assignment purporting to transfer an individual’s right to sue in a representative capacity did not involve a right to recover money or other personal property, nor did it transfer an injury in fact. The court reasoned that although the purported assignor is authorized to bring an action on behalf of others under the UCL or PAGA, it has no ownership interest in the causes of action owned by others and thus has no right to transfer those causes of action to a third party.

Finally, the Court confirmed that Proposition 64 requires plaintiffs in UCL actions to comply with class-action procedures.

In light of Amalgamated, employers may take some solace from the reduced likelihood of complete strangers bringing UCL or PAGA claims against them. Rather, representative claims will come from true representatives, whether they are former employees alleging wage-hour claims or customers claiming unfair business practices. This does not alter the potential claims an employer faces from the “known” plaintiff (e.g. former employees). Amalgamated does not restrict former employees from assuming the representative roles defined under the UCL and/or PAGA, but only these individuals’ ability to transfer their standing to another. Thus employers should continue to ensure their personnel practices are updated and are not in violation of any law that could give rise to UCL or PAGA claims.