In an opinion issued Jan. 19, the Illinois Supreme Court concluded that agreements between temporary staffing agencies that limit employees’ wages or employment opportunities can constitute violations of the Illinois Antitrust Act.

In State ex rel. Raoul v. Elite Staffing Inc., the state of Illinois sued three staffing agencies and their common client alleging that they violated the state’s antitrust statute by entering into agreements to fix the wages of certain employees and not to hire each other’s employees, all of whom worked at the common client’s manufacturing facility. The defendants moved to dismiss the complaint for failure to state a cause of action because the Illinois Antitrust Act bars anticompetitive agreements related to “services,” but the statute’s definition of services states that services “shall not be deemed to include labor which is performed by natural persons as employees of others.” Drawing on several federal cases interpreting this language to provide an exemption broader than the exemption of organized labor activities under federal antitrust law, the defendants argued that the definition of “service” exempted the conduct alleged in the complaint from liability under the statute. The trial court denied the defendants’ motion to dismiss, but certified for interlocutory appeal a question regarding the meaning and impact of the statute’s “services” definition.

The Illinois Supreme Court acknowledged that the “services” definition, on its face, “appears to exempt from antitrust scrutiny all agreements concerning wages and conditions of employment, regardless of their anticompetitive effects.” The court, however, found that such a construction would conflict with the purpose of the Illinois Antitrust Act to prohibit anticompetitive restraints on trade. When considered in the context of the entire statutory scheme, the court found that the language in question is ambiguous. To resolve this ambiguity, the court turned to federal antitrust law and secondary sources written contemporaneously to the enactment of the Illinois Antitrust Act and concluded that the Illinois legislature did not intend to exempt all agreements concerning wages and conditions of labor from scrutiny under Illinois antitrust law. In particular, the court concluded that “multiemployer agreements concerning wages they will pay their employees and whether they will hire each other’s employees may violate the Illinois Antitrust Act unless the agreement arises as part of the bargaining process and the affected employees, through their collective bargaining representatives, have sought to bargain with the multiemployer unit.” This interpretation appears to bring the scope of the Illinois Antitrust Act in line with the exemption for organized labor activities under federal antitrust statutes. The Illinois Supreme Court remanded the case to the trial court for further proceedings.

ASA partnered with the Staffing Services Association of Illinois to file an amicus brief in support of the defendants’ position.

To read the case, see State ex rel. Raoul v. Elite Staffing Inc. (2024 IL 128763).

On Jan. 18, 2024, the California Supreme Court definitively resolved a dispute among the California courts of appeal regarding the discretion of a trial court to strike on manageability grounds a claim under the Private Attorneys General Act of 2004 (PAGA).

The long-awaited decision in Estrada v. Royalty Carpet Mills Inc. (Case No. S 274340) held that “trial courts lack inherent authority to strike PAGA claims on manageability grounds.” Prior to this ruling, the California courts of appeal were split on whether trial courts were empowered to dismiss PAGA lawsuits when the plaintiff’s claims could not be tried in an efficient manner. Now, the law is clear that they are not, even in the face of unmanageable PAGA claims that will take an unduly long amount of time to try.

PAGA authorizes an “aggrieved employee” to stand in the shoes of the state of California to initiate an action for civil penalties against his or her employer “on behalf of himself or herself and other current or former employees” (Cal. Lab. Code §2699[a], [c]). To be considered an “aggrieved employee,” a plaintiff must (1) show that he or she was employed by the employer, and (2) allege that he or she suffered one or more of the Labor Code violations. In other words, the mere act of sustaining a Labor Code violation by one’s employer (or alleging as much) is sufficient to confer “aggrieved” status on an individual.

In the past few years, state and federal courts have addressed motions by defendant employers seeking to strike PAGA claims because they are unmanageable to try. In Wesson v. Staples The Office Superstore LLC, 68 Cal. App. Fifth 746 (2021), one California appellate court held that a lower court has the inherent ability to strike a PAGA claim if it is unmanageable to try. A year later, in Estrada v. Royalty Carpet Mills Inc., 22 WL 855568 (Cal. Ct. App., March 23, 2022), a different appellate court reached the opposite conclusion—California courts lack the authority to strike a PAGA claim based on manageability—but concluded that a court could manage evidence at trial, which could have the effect of limiting the scope of a PAGA claim. Meanwhile, on the federal side, in Hamilton v. Wal-Mart Stores Inc., 39 F.4th 575 (Ninth Cir. 2022), the Ninth Circuit Court of Appeals sided with the Estrada lower court, concluding that federal courts were powerless to strike a PAGA claim on manageability grounds.

Although the state supreme court’s ruling in Estrada represents a clear win for employees pursuing PAGA lawsuits, the decision does provide some recourse for defendants in those cases. Specifically, the court held that “trial courts have numerous tools that can be used to manage complex cases…that do not involve striking a PAGA claim.” While the decision was careful to explain that its fairly ambiguous discussion of the tools available to defendants is “illustrative rather than exhaustive,” it cited as examples the ability of trial courts to “limit witness testimony and other forms of evidence when determining the amount of violations that occurred and the amount of penalties to assess,” and further provided that “courts may…limit the scope of the PAGA claim.” What this means is that, although trial courts can no longer strike unmanageable PAGA claims entirely, they can presumably limit the size of the allegedly aggrieved employee group and/or narrow the scope of the PAGA claim to only those theories of liability that can be presented at trial in an efficient manner, which could substantially cut down the potential exposure in an otherwise far-reaching PAGA lawsuit. How, whether, and when trial courts will actually agree to narrow overly broad PAGA claims remains an open question, the answer to which will widely differ from court to court and hinge on the sensibilities of the judge presiding over the case, absent further guidance from the courts of appeal or the supreme court.

To address the concern of PAGA defendants that the inability of trial courts to strike PAGA claims will impair their due process rights to present their defenses, the court held that “representative testimony, surveys, and statistical analysis, along with other types of evidence, are available as tools to render manageable determinations of the extent of liability.” Moreover, the Estrada decision held open the possibility, however slim, that a PAGA claim that cannot be tried without violating a defendant’s due process rights may be struck on constitutional grounds, stating that “we express no opinion as to…whether…and under what circumstances a defendant’s right to due process might ever support striking a PAGA claim.”

How lower courts apply the California Supreme Court’s ruling remains to be seen. In the meantime, the best strategy for employers to avoid future PAGA liability is to focus their efforts on complying with the California Labor Code. Particularly with respect to highly factual issues, such as meal period compliance, the best way to avoid costly litigation is to utilize facially valid policies and compliant practices.