In the recent decision, Leeper v. Shipt, Inc., et al., (Leeper), the California Court of Appeal reversed a lower court’s order denying the employer’s motion to compel arbitration in a case brought under the Private Attorneys General Act (PAGA). The case involved allegations that Shipt and its parent company Target, misclassified workers as independent contractors, violating multiple provisions of the California Labor Code.  

In this case, the plaintiff, Christina Leeper, attempted to file a PAGA action without including an individual claim, instead focusing solely on the representative aspect of her PAGA lawsuit (a ‘headless’ PAGA action). Leeper intended to represent other aggrieved employees in seeking penalties for alleged labor code violations by her former employer. However, this approach was unsuccessful, providing the Court of Appeal with an opportunity to clarify that every PAGA action inherently includes an individual PAGA claim. This ruling indicates that even if the plaintiff’s primary intention is to represent other employees, there must still be an individual claim subject to arbitration. Consequently, the Court of Appeal directed the lower court to compel arbitration of the individual PAGA claim and stay the representative PAGA claim portion of the lawsuit pending the outcome of the arbitration.  

What Does it Mean 

Overall, the Leeper Court’s ruling underscores the necessity for employers to be proactive in their legal strategies and compliance efforts to navigate the complexities of PAGA litigation and arbitration effectively. A few key takeaways are set out below: 

• Clarification of Individual/Representative Claims. The ruling clarifies that every PAGA action must include an individual PAGA claim. This means that even if a plaintiff aims to represent other employees in a PAGA lawsuit, they must still have an individual claim that can be arbitrated. 

• Right to Compel Arbitration: Assuming the existence of a valid arbitration agreement, employers have the right to compel arbitration of individual PAGA claims, which can potentially stay the representative PAGA claims until the arbitration is resolved. This can be advantageous for employers as it may limit the scope and immediate impact of the lawsuit. 

To assist in mitigating the risks posed by PAGA actions, employers should:  

• Review and revise their arbitration agreements to ensure they include clear provisions for arbitrating individual PAGA claims.  

• Recognize that PAGA actions inherently include individual claims and develop robust arbitration agreements that can withstand legal scrutiny.  

• Regularly review and update employment policies and practices to ensure compliance with the California Labor Code and mitigate the risk of PAGA claims; and  

• Carefully evaluate worker classifications to avoid disputes related to misclassification.