No Arbitration of PAGA Claims

PAGA continues to be an important tool for workers in California seeking to enforce their rights under the Labor Code.  Employers continue to try to force PAGA claims into arbitration, where they think that they have a decisive advantage.  Yet courts continue to block these efforts.  As a result, PAGA claims remain in court where they belong.

The latest case to hold that PAGA claims cannot be arbitrated is Hernandez v. Ross Stores, Inc. (2d DCA Pub. Order 1/3/17) E064026.  There, the plaintiff, a warehouse worker, sought to bring a PAGA-only action against the discount store giant for failure to pay wages, failure to properly itemize hours, and failure to pay overtime.  Ross attempted to compel Hernandez to arbitrate her individual claims, arguing that its arbitration agreement stated that it applied to “any disputes arising out of or relating to the employment relationship” between Ross and an employee.  Ross contended, based upon this language, that before Hernandez could bring a PAGA action, she had to arbitrate the “dispute” over whether she was an aggrieved employee.

Not surprisingly, this too-clever-by-half argument failed.  Both the trial court and Division Two of the Second District Court of Appeal held that Hernandez could not be compelled to arbitrate her PAGA claims.  The trial court grounded its analysis in the seminal case of Iskanian v. CLS Transportation (2014) 59 Cal.4th 348, which held that PAGA actions-whether seeking penalties for one employee or for a group of them-are fundamentally law enforcement actions designed to protect the public.  In PAGA cases, there are therefore no individual claims to arbitrate.

The court of appeal reached a similar conclusion.  Iskanian held that an employee’s right to bring a PAGA action is unwaivable.  Furthermore, PAGA actions are not subject to the Federal Arbitration Act because they are not disputes between employers and employees.

Following Iskanian, Williams v. Superior Court (2015) 237 Cal.App.4th 642 rejected an employer’s attempt to force PAGA claims into arbitration.  In Williams, the employer argued that the plaintiff in a PAGA case should be forced to arbitrate his individual Labor Code claim before being able to bring his PAGA claims in court.  The court of appeal held that PAGA claims could not be divided into arbitrable individual claims and nonarbitrable representative claims.  Accordingly, an employee “cannot be compelled to submit any portion of his representative PAGA claim to arbitration.”

The Hernandez court followed both Iskanian and Williams.  Hernandez’s claims did not involve individual claims.  Rather, they were brought for civil penalties under PAGA.  Accordingly, there were no “disputes” between Hernandez and Ross, as discussed in the arbitration policy.

Ross attempted to distinguish Williams on the grounds that the arbitration agreement in that case referred to “claims” as opposed to “disputes.”  The court of appeal rejected that argument because the term “disputes” obviously includes claims.  Finally, the court noted that because the case involved PAGA claims, it did not involve any individual claims or disputes.

It should therefore be clear to California employers that they cannot force PAGA claims into arbitration, no matter how clever or contorted their arguments.

If you have a question about your workplace, please feel free to call Hunter Pyle Law.  We can be reached at 510.444.4400, or at inquire@hunterpylelaw.com.