7 Cal. App. 5th 171
Cal. Ct. App.2016Background
- Plaintiff Martina Hernandez, a former nonexempt hourly Ross warehouse employee, sued under the California Private Attorney General Act (PAGA) on behalf of herself and other aggrieved employees for alleged Labor Code violations (wages, overtime, wage statements, etc.).
- Hernandez alleged a single representative PAGA claim seeking civil penalties under Labor Code § 2698 et seq.; she did not plead separate individual wage claims.
- Hernandez’s employment agreement contained a mandatory arbitration clause covering "any disputes" arising from employment and barred class, collective, or representative actions; Ross demanded arbitration which Hernandez refused.
- Ross moved to compel arbitration of the "disputes" (including whether Hernandez was an "aggrieved employee") under the Federal Arbitration Act and California law, arguing individual issues underlying the PAGA claim must be arbitrated first.
- The trial court denied Ross’s motion, concluding under Iskanian that a PAGA action is representative (a prosecution on behalf of the state), not an individual dispute, and thus cannot be split or sent to arbitration; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an employment arbitration agreement can compel arbitration of individual disputes (e.g., whether the employee is an "aggrieved employee") underlying a PAGA representative action while leaving the PAGA claim in court | Hernandez: Under Iskanian a PAGA action is a representative enforcement action for the state and is not arbitrable or divisible; plaintiff cannot be forced to arbitrate any part of it | Ross: The arbitration clause covers "any disputes" and thus the individual question of whether Hernandez suffered Labor Code violations (and is an "aggrieved employee") must be arbitrated first; the representative PAGA claim can be litigated afterwards | The court held that PAGA claims are representative actions on behalf of the state and cannot be carved into arbitrable individual disputes and a nonarbitrable representative claim; denial of the motion to compel arbitration was affirmed |
Key Cases Cited
- Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA is a representative enforcement action for the state; PAGA rights are unwaivable)
- Williams v. Superior Court, 237 Cal.App.4th 642 (Cal. Ct. App. 2015) (a single representative PAGA claim cannot be split into arbitrable individual claims and a nonarbitrable representative claim)
- Saint Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (Cal. 2003) (California policy favors arbitration and requires enforcement of arbitration agreements when valid)
- Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (U.S. 1987) (federal precedent recognizing enforceability of arbitration agreements under the FAA)
- Securitas Security Services USA, Inc. v. Superior Court, 234 Cal.App.4th 1109 (Cal. Ct. App. 2015) (requiring piecemeal litigation/arbitration of PAGA issues would undermine PAGA’s public-enforcement purpose)