Unreported / Non-Citable
Background
Adelina Hernandez settled employment claims with her former employer, Brothers International Desserts, signing a separation agreement that included a release. In exchange for $6,720, Hernandez agreed she had been paid all wages and compensation owed and released Brothers from any and all claims, known and unknown, as of the agreement's execution date. Despite this settlement, Hernandez later sued Brothers for Labor Code violations on behalf of herself and all other aggrieved employees, alleging failures to provide meal and rest breaks, pay correct premiums, pay sick pay and overtime wages, and issue accurate wage statements.
Brothers responded by filing a cross-complaint against Hernandez for breach of contract, asserting she violated the release by filing a lawsuit alleging claims that had been waived and released. Hernandez filed an anti-SLAPP motion to strike the cross-complaint under Code of Civil Procedure section 425.16, arguing Brothers had no probability of prevailing because a breach of contract claim premised on filing a PAGA representative action is legally invalid. The trial court denied the motion, finding Brothers showed a probability of prevailing because it produced evidence that the individual claims in Hernandez's lawsuit breached the release provisions.
The Court’s Holding
The Court of Appeal affirmed the order denying Hernandez's anti-SLAPP motion. The court applied the two-step anti-SLAPP analysis, noting that Brothers conceded its cross-complaint satisfied the first prong because filing a complaint in breach of a general release constitutes protected petitioning activity. On the second prong, the court agreed with the trial court that Brothers sufficiently showed a probability of prevailing on its breach of contract claim. The declaration from Brothers' head of human resources established that the parties entered into the release, Brothers performed by paying Hernandez, she breached the release by suing Brothers, and Brothers suffered damages.
The court rejected Hernandez's argument that Brothers could not prevail because wholesale PAGA waivers remain unenforceable. The court emphasized that Hernandez's complaint alleged individual claims on behalf of herself, not just representative PAGA claims, and she had not shown the release of her individual claims was unenforceable. The court found it immaterial whether Hernandez could still prosecute her PAGA claims as a headless PAGA action, explaining that the issue was not whether Hernandez could prevail on some aspect of her complaint but whether Brothers could prevail on its cross-complaint. The court also rejected Hernandez's contention that the release was entirely unenforceable, noting her cited cases concerned predispute arbitration agreements, not post-dispute releases, and that the Labor Code statute she cited requiring notice to the Labor and Workforce Development Agency applied only to settlement of litigation, not prelitigation releases. The court denied Brothers' request for judicial notice of a complaint and order from a different lawsuit as immaterial, and awarded Brothers its costs on appeal.
Key Takeaways
- A post-dispute release of individual employment claims can be enforced through a breach of contract action even when the employee later files a PAGA representative action.
- An employer can defeat an anti-SLAPP motion challenging a breach of contract cross-complaint by showing the employee's individual claims in the lawsuit breached a settlement release.
- The viability of PAGA claims as a headless action is immaterial to whether an employee breached a release by asserting individual claims in the same lawsuit.
- Cases prohibiting predispute arbitration agreements do not apply to post-dispute releases of employment claims.
- Labor Code section 2699, subdivision (s)(2) requires Labor and Workforce Development Agency notification only for settlement of filed litigation, not prelitigation releases.
Why It Matters
This decision clarifies that employers can enforce post-dispute settlement releases through breach of contract claims even when employees subsequently file PAGA representative actions, provided the lawsuit includes individual claims that were released. The ruling distinguishes between predispute arbitration agreements, which face greater scrutiny, and post-dispute releases, which employees enter with full knowledge of their claims.
The opinion reinforces that anti-SLAPP protection for petitioning activity does not immunize parties from breach of contract liability when they violate settlement agreements by filing lawsuits. By focusing on whether the employee's individual claims breached the release rather than whether PAGA claims could proceed, the court provided a framework for analyzing similar disputes involving settlement releases and subsequent representative actions.