On May 14, 2025, the California Court of Appeal issued a decision in Rose v. Hobby Lobby Stores, Inc., addressing whether the California Labor and Workforce Development Agency (LWDA) can be held liable for an employer’s litigation costs in an unsuccessful Private Attorneys General Act (PAGA) action where the LWDA was not an active participant.

The plaintiff, a former cashier at Hobby Lobby, filed a representative PAGA action alleging violations of California’s “suitable seating” requirements. Following a nine-day bench trial, the court ruled in favor of Hobby Lobby.  Hobby Lobby then sought to recover approximately $475,000 in litigation costs under California’s general cost recovery statute, Code of Civil Procedure section 1032(b), naming both Rose and the LWDA as jointly responsible.

The trial court rejected most of Rose’s objections and ordered the LWDA to pay $124,585.24 of Hobby Lobby’s costs, even though the LWDA had not intervened or participated in the litigation. The LWDA appealed.

The Court of Appeal reversed the trial court’s cost order, holding that even if prevailing employers may recover costs under section 1032(b), they cannot recover those costs from the LWDA when the LWDA did not actively participate in the litigation.  The court rejected Hobby Lobby’s argument that the LWDA was a party to the litigation through an agent-principal relationship with the plaintiff.  Further, the court reasoned that PAGA did not give the LWDA control over litigation brought by a PAGA plaintiff.

Key Takeaways for Employers

• Employers May Still Seek Costs—But Not From the State: The court declined to resolve whether prevailing employers are categorically barred from recovering costs under PAGA.  But it clearly held that those costs cannot be imposed on the LWDA when the agency did not play an active role in the case.
• Litigation Strategy Consideration: When seeking cost recovery in the event that a PAGA case ends with a trial, employers should focus on the named plaintiff rather than the state, and be prepared for pushback, as prevailing employer cost recovery is still unsettled.
• PAGA Remains Unfriendly to Employers: Despite changes to PAGA that have alleviated a few concerns from employers, this decision suggests that some courts may believe that allowing cost-shifting against a nonparticipating state agency would discourage employee enforcement and undermine PAGA’s legislative purpose.

While Rose v. Hobby Lobby does not answer all outstanding questions about employer cost recovery under PAGA, it clearly signals that nonparticipating government entities are insulated from liability for litigation costs.  Employers should monitor ongoing developments in this space and consult with counsel to evaluate cost recovery strategies and the litigation risk posed by PAGA claims.