63 Cal.App.5th 937
Cal. Ct. App.2021Background
- California’s Private Attorneys General Act (PAGA) deputizes "aggrieved employees" to sue on the state’s behalf for Labor Code civil penalties; recovered penalties are split (75% to state agency, 25% to employees). (Kim v. Reins Int'l Cal., Inc.)
- A PAGA action is a government enforcement action (a qui tam–like claim); the state is the real party in interest, not the private plaintiff. (Kim)
- Defendant sought to compel arbitration under an agreement containing a delegation clause, arguing the arbitrator must decide whether plaintiff is an employee (and thus an "aggrieved employee" with standing under PAGA).
- Courts of Appeal (including Provost and Contreras) have held threshold questions of PAGA standing/employee status cannot be split into arbitrable individual issues and nonarbitrable representative PAGA claims.
- The court reaffirmed Iskanian: PAGA claims lie outside the FAA and preemption by the FAA does not invalidate state policies protecting PAGA enforcement; Epic Systems did not overrule Iskanian.
- The trial court’s order denying arbitration was affirmed; plaintiff awarded costs on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA governs PAGA arbitrability or allows a delegation clause to send the question of employee status to an arbitrator | PAGA is a state enforcement action; the state (not the private parties) is real party in interest, so FAA does not control and arbitration cannot decide PAGA standing | FAA/governs arbitration provisions; delegation clause makes arbitrator the proper decisionmaker on threshold issues like worker classification | Court held Iskanian controls: PAGA claims lie outside FAA; arbitrator cannot resolve whether plaintiff is an "aggrieved employee" for a representative PAGA-only action. |
| Whether Epic Systems overruled Iskanian and requires enforcement of individualized-arbitration terms for PAGA claims | Iskanian remains controlling because Epic Systems did not address governmental representative claims and did not decide the same question | Epic Systems broadly enforces arbitration agreements and class/collective action waivers, so it implicitly undermines Iskanian | Court follows Correia/other CA appellate decisions: Epic Systems did not decide the Iskanian issue; Iskanian remains good law. |
| Whether the threshold worker-classification question is a "private" dispute separable from the PAGA representative claim | Plaintiff: class/employee-status inquiry is integral to the representative PAGA claim and cannot be adjudicated in private arbitration without the state's consent | Defendant: classification is a private-contract issue between employer and worker and thus arbitrable | Court rejects defendant’s "wordsmithing"; if arbitrator finds no employee, it would extinguish the state’s claim without the state's consent—so the issue is not separable or arbitrable. |
| Whether a PAGA cause of action can be split into an individual arbitrable claim and a representative nonarbitrable claim | Plaintiff: a PAGA-only representative action is indivisible and belongs to the state; splitting would permit private arbitration to nullify the state’s claim | Defendant: precedent splitting "individual" vs "representative" issues supports arbitration of threshold elements like employment status | Court follows Provost/Contreras/Williams: a single PAGA cause of action cannot be split so as to compel arbitration of the representative claim’s threshold elements. |
Key Cases Cited
- Kim v. Reins International California, Inc., 9 Cal.5th 73 (2020) (describing PAGA as a state enforcement, qui tam–like action and framing the state as real party in interest)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) (holding predispute waivers of representative PAGA actions are contrary to public policy and that PAGA lies outside FAA coverage)
- Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) (holding FAA requires enforcement of individualized-arbitration agreements against NLRA-based challenges—but did not decide FAA coverage of governmental representative claims)
- Provost v. YourMechanic, Inc., 55 Cal.App.5th 982 (2020) (refusing to split PAGA representative actions into arbitrable individual and nonarbitrable representative components)
- Contreras v. Superior Court, 61 Cal.App.5th 461 (2021) (holding petitioners may not be compelled to arbitrate whether they are "aggrieved employees" under PAGA)
- Correia v. NB Baker Electric, Inc., 32 Cal.App.5th 602 (2019) (explaining Epic Systems did not overrule Iskanian; intermediate courts must follow CA Supreme Court unless U.S. Supreme Court decided same question differently)
- Williams v. Superior Court, 237 Cal.App.4th 642 (2015) (holding PAGA claims cannot be split into arbitrable individual and nonarbitrable representative parts)