PAGA cases detained by arbitration: mice and elephants

July 31, 2021 0 Comments


If it is nobler to bear the slings and arrows of scandalous fortune and thereby represent the public good, or submit to the charge of a leech feeding others the soul of California’s economy, that is the question. And it will be decided by an appeals court one day, but until then, we have defense lawyers, and not a few judges, who would transmute a pure “Law of the Private Attorney General” into a hybrid kind of class action, with all the obstacles that it accompany. and cheating for Plaintiffs.

“PAY” in a nutshell is a set of California Labor Codes that throws the ball to private attorneys to do what the California legislature found the state wage enforcement agency could not or would not: hold employers accountable for violations of the Labor Code. The statute has a built-in incentive for private attorneys to act as “attorneys general” to file such lawsuits and recover attorneys’ fees for their efforts if they win. As part of the “deal,” the employees and the state divided the proceeds of the recovery.

The procedural battle is now in the dark valley between a clear PAGA-based legal action for the penalty that would normally be recovered by the State of California, and specific individual Labor Code claims that allow for a direct cause of action without sharing the reward. with the state. . The reasoning of the courts above is that an arbitration claim signed by an employee does not extend to a Labor Code penalty case recoverable only by the state of California prior to PAGA. California and the employee (s) are effectively 75% and 25% equity partners respectively in the case, and the employer cannot compel the State of California to participate in arbitration. But when it comes to claiming overtime or breaking the rest break, for example, the employee has a direct and independent right to recover those amounts as “wages” rather than penalties. Those claims may be subject to an arbitration agreement signed by the employee.


Current California law is that a pre-dispute PAGA waiver cannot be enforced even if there was an intention to quit. The exemption is simply unenforceable because it is contrary to the fundamental policy of the PAGA statutes to rectify and remedy the employer’s labor violations through the statutes of sanctions through the State’s enforcement action. Securitas Security Services USA, Inc. v. Superior Court (Edwards) 2015 Cal.App. LEXIS 190 (Cal. App. 4th Dist. February 27, 2015). Because the resignation with arbitration agreement had a clause that prevented cutting PAGA’s illegal resignation, the entire agreement was invalid because it was contrary to public order.

The situation arises when a plaintiff’s attorney includes multiple causes of action in a short document first filed called a “Complaint.” The Lawsuit alleges some violations that are unique because, in the past, those causes of action are for civil penalties that were recoverable only by the State of California, through the Department of Industrial Relations.

Now, if the Plaintiff-employee meets certain conditions by notifying the Department, and the Department gives its consent, the Plaintiff may proceed to collect legal penalties from the Defendant-Employer. But suppose the Plaintiff has presented other causes of action that employees have always been able to sue without the approval of the Department, such as overtime or break violations, or perhaps actions for discrimination, whistleblower retaliation, or defamation.

Suppose the plaintiff has included such causes of action in his complaint, along with penalty-based causes of action, and suppose further that when the plaintiff started work, before any dispute arose, he signed an arbitration agreement that all Disputes between employer and employee would be resolved by private binding arbitration. That is, there will be no jury, judge, or court of appeal. Instead, the parties hire a private company, known as an arbitration service, to resolve the dispute. The contract signed by the employee includes an onerous and stubborn resignation: class actions are not allowed.

For the final link in the chain of assumptions: Suppose the Respondent persuades the Tribunal that the Arbitration Agreement is enforceable, and the Tribunal orders the case in Arbitration, with one exception. Claims for legal sanction, for the preceding case, are not subject to arbitration, and those that the Court separates from the Agreement, sending the remaining causes of action to Arbitration. These non-arbitrable causes of action for sanctions are called “PAY” claims. These claims generally involve many employees suing as a group, but for technical reasons, the group is not considered a “class” requiring a court order approving the class for “class certification.” This is important because PAGA claims can produce sizable verdicts in the millions of dollars.


The stage is set: are the courts ordering individual wage claims to be arbitrated while the PAGA case stands and thus “wait and see” if the employee has viable PAGA claims? Perhaps the PAGA representative will simply walk away if you obtain your full recovery through arbitration or settlement.

The Court can suspend the PAGA case because it does not want parallel proceedings that would produce inconsistent results and that may produce some collateral impediment in terms of facts / issues in the PAGA case. The trial court may take the position that it has no jurisdiction over the Arbitration Agreement and the timing of the Arbitration to proceed because it is a matter of separate private agreement between the employer and the employee. The trial court can also expect the PAGA case to be resolved in the course of arbitration, even if that case is still within the jurisdiction of the Court.

The main argument of the defense bar: appealing to the self-interest of overburdened courts dealing with the complexities of multi-party litigation and the self-interest of the PAGA representative. The first fissure in the defense argument: the courts of first instance, until they are relieved by the courts of appeal, must not sacrifice the purpose and direction of PAGA for the sake of administrative efficiency.

“Delivering” the case in parts, especially to a non-judicial official, is a solution, but also a judicial error. It is a common military tactical offensive and now driven by defense: divide and conquer, and the cost of war increases through attrition, but of course, in the name of efficiency.

But “little by little” is one thing and case management is another. It is reasonable to expect a court to control its own procedures to ensure due process and contain the cost and complexity of litigation. It is not yet clear how much restraint and control there may be in PAGA cases, or what law or jurisprudence will support “case management,” even to the potential point of denying that the PAGA case is going forward. The classic Post-Brinker v. The situation for Restaurant Group is if break break violations are so variable from employee to employee that class certification is not indicated. Could and should the same be said for a PAGA case of sanctions?


More trial courts will decide “which goes first”: arbitration of non-PAGA wage claims or PAGA’s case for a civil lawsuit? That question has a very practical touch. If arbitration first, issues are explored by discovery that may well affect the trial court case. It would be the classic “wag the dog’s tail”. Logic would indicate that you dedicate time and energy to the most important problems, and that the small case of individual overtime will be subsumed in an eventual agreement. Or have individual overtime claims dismissed to allow for a pure PAY case. Of course, the simple solution, subject to the client’s consent, is to bring only the “pure PAY” case and, where possible, choose only a “clean” PAY case. That is, do not include low or high risk individual wage and discrimination claims. In addition, Private Attorneys General, that is, Plaintiffs’ attorneys, should focus on those cases that have a high degree of concordance based on a widespread violation of the company. Such was, for example, in the case of Bright v. 99 Cent Only Stores 189 Cal. App4th 1472 (2010) where the failure to provide seating stools at retail checkout stations was the result of a company policy that stools were impractical.


Courts will devise their own case management rules that will be less than strict class action certification procedures, but more than full freedom to litigate the matter as a one-party case. Experienced attorneys already handle these types of “complex” cases and will likely use complex multi-party litigation guidelines to control the costs and scope of discovery, and to come up with quick and efficient ways to resolve interim backlogs in litigation. But I also predict that the California Supreme Court will resolve the final character of these disputes as “for the public good” and as if they were brought forward by the state’s elected Attorney General. The result will be unsatisfactory for the plaintiff or the bar of the defense, but it will allow the PAGA cases to be heard and concluded quickly without the impediment of Arbitration or some variation of the Class Action Certification procedures.


Greed, in the paraphrased words of Adam Smith, is what makes the world go round. The defense bar appears to denigrate both the intelligence and foresight of the California legislature by stating that this is not a “private attorney general” case, but a “get rich act” of the plaintiffs’ attorneys. Well that’s fine, but that’s surely incidental to the real incentive of the PAGA statutes: an incentive for employers to change their operations to comply with the law with each press release of another verdict for employees. If employers want to close PAGA cases, let them comply with the law.

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