Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 189 According to Iskanian, PAGA claims directly enforce the State’s interest in penalizing and deterring employers who violate California’s labor laws. Thus, Iskanian held that California law prohibiting waivers of PAGA claims does not interfere with the FAA’s goal of promoting arbitration and is, therefore, not preempted.924 E. California Judicial Reactions to Iskanian and PAGA 1. California Appellate Courts Continue to Keep PAGA Claims out of Arbitration Since Iskankian, employees have tried to avoid arbitration by bringing PAGA-only cases. Employers have tried to combat this tactic, without much success. One employer attempted to compel plaintiff’s PAGA claims to arbitration on the premise that these claims were encompassed by her arbitration agreement because the agreement required that she arbitrate all “employment-related disputes.”925 The Court of Appeal stated: “[R]egardless of whether an individual PAGA cause of action is cognizable, a PAGA plaintiff’s request for civil penalties on behalf of himself or herself is not subject to arbitration under a private arbitration agreement between the plaintiff and his or her employer ... because the real party in interest in a PAGA suit, the state, has not agreed to arbitrate the claim.”926 Another employer sought to compel arbitration of the predicate issue of whether the plaintiffs themselves had been subject to any Labor Code violations.927 Even though the employer did not seek to preclude the plaintiffs from pursuing a PAGA representative action in court, but only to arbitrate the individual issues determinative of plaintiff’s standing as “aggrieved employees” in connection with their PAGA claims, the Court of Appeal rejected the employer’s argument.928 Relying on Iskanian, the court noted that every PAGA action is a representative action, as opposed to an individual action, and that forcing a PAGA plaintiff to first litigate status as an “aggrieved employee” would undermine the public policy goals of the statute.929 Following Epic Systems, employers attempted to argue that the “Iskanian rule” preventing PAGA claims being compelled to arbitration had been overruled by the U.S. Supreme Court’s decision. This approach was met with 924 Iskanian, while prohibiting employees from agreeing to arbitrate PAGA claims as a condition of employment, appeared to leave open the possibility that employees could later agree to arbitrate PAGA claims after a dispute arises. 59 Cal. 4th at 383. In 2017, the Court of Appeal, for all practical purposes, closed the door on “post dispute” PAGA arbitration agreements. In two decisions, it held that the predispute/postdispute boundary is not crossed until an employee is authorized to commence a PAGA action as an agent of the state. In other words, employees can agree to arbitrate their PAGA claims only after they have first submitted their notice to the LWDA, and have either waited the requisite 65 days or have received permission to commence a lawsuit. Julian v. Glenair, Inc., 17 Cal. App. 5th 853 (2017); Betancourt v. Prudential Overall Supply, 9 Cal. App. 5th 439 (2017). At that point, of course, it would be exceedingly unlikely that the employee, who would almost certainly be represented by counsel, would agree to arbitrate. 925 Tanguilig v. Bloomingdales, 5 Cal. App. 5th 665 (2016); see also Hernandez v. Ross Stores, Inc., 7 Cal. App. 5th 171 (2016) (noting that the use of the word “dispute” rather than “claim” in the arbitration agreement was a “distinction without a difference” and affirming the lower court’s denial of defendant’s motion to compel arbitration). 926 Id. at 677. 927 Perez v. U-Haul Co. of California, 3 Cal. App. 5th 408 (2016). 928 Id. 929 Id. at 421-22; see also Contreras v. Superior Court., 61 Cal. App. 5th 461 (2021) (employer cannot compel mechanic to arbitrate whether he was an “aggrieved employee” with standing under PAGA); Provost v. YourMechanic, 55 Cal. App. 5th 982 (2020) (same).
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