The Buck Stops There: California Employees May Not Transfer Their Standing as Class Representatives to Third Parties
The Second District of the California Court of Appeal recently handed a significant defeat to a California union by barring it from acting as class representative in a lawsuit seeking to enforce employee claims under the Labor Code.
In Amalgamated Transit Union, Local 1756 v. Superior Court, the Union had persuaded a number of its members to execute agreements that assigned their claims for alleged meal and rest break penalties to the union. These agreements also purported to transfer the employee’s right to act as a class representative to the Union. Relying on these assignment agreements, the Union then filed a class action lawsuit, seeking over $10 million in alleged meal and rest break penalties from the employer on behalf of an entire class of workers.
The Court first noted that employees may lawfully assign their individual claims for damages to others. Such damages claims are a form of transferable property just like any debt. Thus, the Union did have standing to sue to collect any unpaid wages or penalties owed to the individuals who had expressly assigned their claims to the Union.
The Court held, however, that the Union did not have standing to act as a class representative. In reaching this conclusion, the Court held that standing to act as a legal representative for others -- whether in a class action or an uncertified “private attorney general” action -- is not a form of transferable property right. As the Court explained, “because the purported assignor (the employee) although authorized by [the law] to bring an action behalf of others, has no ownership interest in the causes of action owned by others, the employee necessarily has no right to transfer those causes of action to a third party.” Thus, the right to act as a class representative could not be transferred to the Union.
If the Court had not ruled as it did, employees would have been permitted to sell their status as potential class representatives to the highest bidder. Indeed, the buyers of these rights could presumably have re-sold them like some form of tradable commodity, thereby spawning a whole new source of class action plaintiffs. The Amalgamated Transit ruling is no doubt especially disappointing to unions who have recently been looking for ways to exploit their access to their members in order to gain a share of the lucrative California wage and hour class action market.