85 Cal.App.5th 983
Cal. Ct. App.2022Background
- Simplified Labor Staffing Solutions hired Sylvia Lewis in Sept. 2019; she signed a predispute arbitration agreement (FAA-based) covering claims arising from the employment relationship.
- Lewis sued in 2020 under PAGA alleging various Labor Code violations (wages, meal/rest breaks, recordkeeping, reimbursement).
- Simplified moved to compel arbitration; the trial court denied the motion relying on California appellate authority (following Iskanian) that predispute arbitration of PAGA claims is unenforceable because the State is the real party in interest and must "consent."
- While the appeal was pending, the U.S. Supreme Court decided Viking River Cruises, Inc. v. Moriana, holding the FAA applies to PAGA claims and preempting California’s rule prohibiting splitting individual and non-individual PAGA claims.
- The Court of Appeal reversed the trial court: Viking River undermined and preempted the State-must-consent rule, individual PAGA claims must be arbitrated per the agreement, and the arbitrator (per incorporated AAA rules) should decide whether non-individual PAGA claims fall within the arbitration clause.
- The panel declined to take judicial notice of a separate settlement (Shackelford) for lack of a clear, undisputed record showing it extinguished Lewis’s PAGA claims.
Issues
| Issue | Plaintiff's Argument (Lewis) | Defendant's Argument (Simplified) | Held |
|---|---|---|---|
| Enforceability of predispute arbitration of PAGA claims (State-must-consent rule) | Iskanian and related authorities: PAGA suits are actions by the State; an employee cannot bind the State pre-dispute, so predispute arbitration waivers are unenforceable | The FAA governs and requires enforcement of predispute arbitration agreements covering employment disputes, including PAGA claims | Viking River compels reversal: the State-must-consent rule does not survive Viking River and is preempted by the FAA; predispute arbitration may be enforced |
| Whether the FAA applies to PAGA actions | PAGA involves the State as real party in interest and (per Iskanian) lies outside FAA coverage | FAA applies because PAGA actions necessarily involve disputes between employee and employer and do not inherently conflict with arbitration | Viking River rejects Iskanian’s FAA-exemption; FAA applies to PAGA claims |
| Arbitrability and forum for non-individual (representative) PAGA claims | Lewis contends her individual claims must be arbitrated but non-individual claims can proceed in court; she disputes that arbitration of individual claims deprives her of standing for representative claims | Simplified argues Viking River permits splitting and, if individual claims are arbitrable, non-individual claims must also be addressed (potentially by dismissal or arbitration) | Court: arbitrability of non-individual PAGA claims is for the arbitrator to decide under the parties’ incorporated AAA rules; remand to arbitration with scope to be determined by arbitrator |
| Effect of Simplified’s settlement in a separate action (Shackelford) on Lewis’s standing | Lewis disputes that the settlement extinguished her claims and notes factual disputes about covered dates and releases | Simplified asserted the settlement extinguished some PAGA claims and sought judicial notice | Court declined to take judicial notice due to disputed facts and an inadequate record; left settlement effect for remand/proceedings below |
Key Cases Cited
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA applies to PAGA; preempts California rule forbidding splitting individual and non-individual PAGA claims)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA plaintiffs are private attorneys general; held predispute waivers of PAGA claims unenforceable under state law)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (state rules that obstruct FAA objectives are preempted)
- Southland Corp. v. Keating, 465 U.S. 1 (U.S. 1984) (FAA preempts state law that withdraws power to enforce arbitration agreements)
- Perry v. Thomas, 482 U.S. 483 (U.S. 1987) (FAA’s strong federal policy: private arbitration agreements must be enforced)
- EEOC v. Waffle House, Inc., 534 U.S. 279 (U.S. 2002) (a government enforcement action is not necessarily bound by a private arbitration agreement)
- Kim v. Reins Int’l Cal., Inc., 9 Cal.5th 73 (Cal. 2020) (interpreting Iskanian; courts had refused to permit splitting PAGA claims for arbitration)