Zakaryan v. The Men's Warehouse, Inc., B289192

Background

Plaintiff Arthur Zakaryan, a former Men’s Wearhouse store manager, signed arbitration agreements in 2006 and 2015 and sued in January 2017 under PAGA alleging misclassification of managers (no overtime, missed meal/rest breaks), seeking unpaid wages, PAGA penalties, waiting-time penalties, interest, and fees on behalf of aggrieved employees.
Men’s Wearhouse moved to compel arbitration of the portion of the PAGA claim seeking underpaid wages, relying on the arbitration agreements; the motion was filed after answering and after the Esparza decision.
The trial court denied the motion to compel, finding that a solitary PAGA claim cannot be split to send the underpaid-wages component to arbitration while retaining statutory penalties in court.
Men’s Wearhouse appealed; the Court of Appeal reviews de novo whether a PAGA claim may be bifurcated between arbitration and court.
The court held that splitting a solo PAGA action is impermissible as a matter of the primary-rights doctrine, inconsistent with PAGA’s statutory scheme (single civil penalty allocated 75/25 to the state and employees), and incompatible with Iskanian’s reasoning that PAGA claims are representative law-enforcement actions not subject to arbitration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a solitary PAGA claim may be split so the underpaid-wages component is arbitrated while statutory penalties remain in court	Zakaryan: PAGA claim is indivisible and representative; cannot be split; sending wages to arbitration would undermine PAGA and Iskanian	Men’s Wearhouse: Underpaid wages are individual/private in nature and arbitrable; section 558 allocates underpaid wages to employees, so arbitration of that portion is appropriate	Court: Not allowed; a solitary PAGA claim cannot be split and sent to different fora; denial of motion to compel arbitration affirmed
Whether section 558’s allocation of underpaid wages to affected employees overrides PAGA’s 75/25 allocation	Zakaryan: PAGA governs allocation when employee sues as proxy for the state; single civil penalty must be allocated under PAGA	Men’s Wearhouse: Section 558 mandates underpaid wages go to affected employees and creates separable components that support splitting	Court: PAGA’s allocation governs in PAGA actions; section 558 does not supersede PAGA and section 558 describes components of a single civil penalty, not separate, severable claims
Whether permitting split-arbitration would conflict with Iskanian and representative nature of PAGA	Zakaryan: Splitting would eviscerate Iskanian by sending the core enforcement question to arbitration and allowing parties to contract away state enforcement	Men’s Wearhouse: Arbitration of the individual component is consistent with FAA and parties’ agreements	Court: Splitting would undercut Iskanian and improperly bind the state’s enforcement interest to private arbitration
Whether primary-rights/claim-splitting doctrine bars dividing PAGA remedies between fora	Zakaryan: A PAGA action asserts one primary right (public enforcement); splitting would divide that single right	Men’s Wearhouse: The remedies are distinct (individual wages vs statutory penalties) so splitting is permissible	Court: Primary-rights doctrine prohibits dividing a single PAGA claim into separate suits/arbitral actions

Key Cases Cited

Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA claims are representative public-enforcement actions and cannot be waived or compelled to arbitration)
Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (PAGA deputizes employees as private attorneys general to recover statutorily prescribed civil penalties)
Esparza v. KS Indus., L.P., 13 Cal.App.5th 1228 (Cal. Ct. App. 2017) (held a PAGA claim may be split and the underpaid-wages portion arbitrated)
Lawson v. ZB, N.A., 18 Cal.App.5th 705 (Cal. Ct. App. 2017) (held a PAGA claim may not be split; disagreed with Esparza)