September 2, 2021

PAGA Claims Are Not Subject To Arbitration

Confirmation has again been provided – if such was needed – that current or former employees “cannot be compelled to arbitrate [Private Attorneys General Act (PAGA)] claims based on a predispute arbitration agreement.” This was the finding of the Court of Appeal (5th District) in its ruling in the case Herrera v. Doctors Medical Center of Modesto (August 2021).

Defendant Medical Center of Modesto appealed a lower court ruling denying enforcement of its previously signed arbitration agreement. Interpreting (once again) the California Supreme Court’s ruling in Iskanian v. CLS Transportation Los Angeles, LLC (2014)[i] the court made clear that alleged PAGA claims “are owned by the state and are [ ] pursued” by representative plaintiffs (in this case, Defendant’s former employees) as the state’s agent or proxy. Because the state was not a party to, nor did it ratify, the signing of any of the arbitration agreements in question, the agreements cannot be enforced against them. Reasoning further, the court found there was no agreement by the state to arbitrate the PAGA claims after the former employees became representatives of the state in enforcing the alleged wage and hour violations. In other words, “PAGA claims cannot be forced into arbitration based on agreements made by [ ] former employees before they became authorized representatives of the state.”

There are many reasons businesses should use arbitration agreements. However, employers utilizing arbitration agreements should consult with legal counsel to make sure their agreements clearly omit any PAGA representative claims from the arbitral proceedings.

Members seeking further information on the use of arbitration agreements should contact Western Growers.

[i] 59 Cal.4th 348.