California workers are increasingly turning to the Private Attorneys General Act (PAGA) to protect their rights under the Labor Code. Labor Code section 558(a) is particularly useful to 
workers who have not been paid all wages owed, because it provides that workers can recover as a civil penalty any underpaid wages as well as an additional penalty of $50 or $100 for each pay period in which they were not paid all wages due.
California employers have been trying to force PAGA claims, including claims under section 558, into arbitration, where they believe they have a better chance of prevailing. Employers got a boost in 2017 from one particularly troublesome case called Esparza v. KS Industries (2017) 13 Cal.App.5th 1228. There, the court held that the underpaid wages portion of a claim under Section 558 (as opposed to the penalties portion) was subject to arbitration.
Fortunately, another California court of appeal has issued a decision that rejects Esparza. In Lawson v. ZB, N.A. (2017) 18 Cal.App.5th 705 , the Fourth District Court of Appeal held that claims for unpaid wages under Section 558 cannot be severed from claims for penalties under that same section. Accordingly, such claims cannot be sent to arbitration.
The Lawson court disagreed with Esparza on a number of grounds. First, it found that claims for underpaid wages under Section 558 are civil penalties that can only be recovered under PAGA. Therefore, Esparza is wrong in concluding that employees can pursue relief under section 558 without bringing a PAGA claim. The Lawson court also rejected Esparza‘s unsupported assertion that recoveries under Section 558 would go largely to individual employees.
For these reasons, Lawson reversed the trial court’s decision to bifurcate that Section 558 claims into wages and penalties, as well as the decision to send the wages claim to arbitration. The court also noted that arbitration of PAGA penalties was problematic-although the bigger question of whether employers can force PAGA claims into arbitration at all will have to wait for another day.
If you have questions about your unpaid wages, please feel free to contact Hunter Pyle Law and use our free initial intake process. We can be reached at (510) 444-4400 or hunterpylelaw.com.