67 Cal.App.5th 538
Cal. Ct. App.2021Background
- Doctors Medical Center of Modesto (Tenet subsidiary) employed plaintiffs Herrera and Rothstein, who signed a one‑page 2010 acknowledgement adopting the employer’s Fair Treatment Process (FTP) that required final and binding arbitration of employment‑related disputes.
- Both plaintiffs later worked as nonunion shift managers (not covered by the nurses’ CBA) and resigned in 2018.
- Plaintiffs sent a PAGA notice alleging multiple Labor Code violations; the LWDA did not investigate within 65 days, so plaintiffs filed a representative PAGA action seeking civil penalties.
- Defendant petitioned to compel arbitration based on (1) the individual 2010 acknowledgements and (2) CBA arbitration/grievance provisions; the trial court denied the petition.
- On appeal defendant argued binding arbitration should be compelled (1) under the FAA, (2) because LMRA §301/CBA preempt state law, and (3) because the arbitration provisions broadly cover employment disputes. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a predispute arbitration agreement between an employee and employer compel arbitration of representative PAGA claims for civil penalties? | PAGA claims are owned by the state and a predispute employee agreement cannot bind the state or an employee acting as the state’s agent. | Iskanian only prohibits PAGA waivers; arbitration may still be compelled if the clause covers the claim. | The court follows Iskanian/Esparza and holds predispute agreements cannot be enforced to compel arbitration of PAGA representative claims. |
| Does the Federal Arbitration Act (FAA) preempt California law and require arbitration of PAGA claims? | PAGA actions are actions by the state (through its agents) and lie outside the FAA’s coverage. | FAA (and related federal law) preempts contrary state rules and compels arbitration. | FAA does not preempt; PAGA claims lie outside FAA coverage, so federal law does not compel arbitration. |
| Does LMRA §301 (preemption) require arbitration where a CBA exists? | Plaintiffs assert they were nonunion shift managers during the relevant period and not subject to CBA grievance/arbitration, so LMRA preemption doesn’t apply. | The CBA’s arbitration/grievance scheme preempts state claims that require interpretation/application of the CBA. | Appellant failed to carry record/briefing burden to show error; appellate court presumed trial court found the CBA inapplicable. LMRA preemption not shown. |
| If the arbitration clause broadly covers employment disputes, does that alone compel arbitration of PAGA claims? | Even if clause is broad, an individual’s predispute agreement cannot bind the state or the employee acting as the state’s agent after becoming a PAGA representative. | The FTP/acknowledgement broadly covers any claim related to employment and should include PAGA claims. | The court assumed (without deciding) the clause could cover PAGA claims, but held the agreements were unenforceable as to representative PAGA claims. |
Key Cases Cited
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA representative actions for civil penalties cannot be waived in predispute employment arbitration agreements; PAGA claims lie outside FAA coverage).
- ZB, N.A. v. Superior Court, 8 Cal.5th 175 (Cal. 2019) (an aggrieved employee pursuing PAGA acts as the state’s agent; arbitration agreements made before agency status do not bind the state).
- Esparza v. KS Indus., L.P., 13 Cal.App.5th 1228 (Cal. Ct. App. 2017) (predispute arbitration agreement cannot be relied upon to compel arbitration of representative PAGA claims).
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (U.S. 2018) (federal arbitration precedent on class/collective actions; did not displace Iskanian’s holding that PAGA lies outside FAA coverage).