However, apparently recognizing the potential defect in its appeal, shortly after ZB filed its notice of appeal, ZB filed a petition for a writ of mandate challenging the trial court's order. We thereafter ordered that the appeal and petition be considered together and issued an order to show cause. By separate order we have now consolidated the appeal and the writ proceeding and reach the merits of ZB's contentions with respect to the trial court's order in our disposition of ZB's petition for extraordinary relief.
In our disposition on the merits, we find the trial court erred in bifurcating the underpaid wages portion of Lawson's PAGA claim and ordering arbitration of that portion of the claim. Accordingly, we issue a writ directing the trial court to vacate its order bifurcating and compelling arbitration of the underpaid wages portion of Lawson's PAGA claim.
FACTUAL AND PROCEDURAL BACKGROUND
According to the allegations of her complaint Lawson began working for California Bank & Trust (CBT) as an hourly employee in 2013. CBT is a
In response to Lawson's complaint, and relying on an arbitration provision in her employment agreement, ZB filed a motion to compel Lawson to arbitrate the underpaid wages she asserted she, as an individual , was owed. ZB noted that Lawson had waived the right to bring either a class action or representative action against it. ZB argued that in light of that waiver, in Iskanian v. CLS Transportation Los Angeles, LLC (2014)
ZB filed a timely notice of appeal, as well as a petition for a writ of mandate.
DISCUSSION
ZB's Appeal
I.
Code of Civil Procedure section 1294 provides in pertinent part: "An aggrieved party may appeal from: (a) An order dismissing or denying a petition to compel arbitration." (Italics added.) The right to appeal is solely statutory and no statute permits an appeal from an order compelling arbitration. ( Porter v. United Services Automobile Assn. (2001)
We of course agree that when an order delays or otherwise interferes with arbitration, it is the functional equivalent of an order denying arbitration and appealable under section 1294, subdivision (a). (See Sanders v. Kinko's Inc. (2002)
Our unwillingness to find appellate jurisdiction here is, in some measure, informed by ZB's petition for a writ of mandate by which it raises the same arguments on the merits it asserts on appeal and our conclusion those issues are the appropriate subject of writ review. "California courts had held that writ review of orders compelling arbitration is proper in at least two circumstances: (1) if the matters ordered arbitrated fall clearly outside the scope of the arbitration agreement or (2) if the arbitration would appear to be unduly time consuming or expensive. [Citations.]" ( Zembsch v. Superior Court (2006)
II.
A. PAGA
The court summarized the Legislature's enactment of PAGA in Arias v. Superior Court (2009)
"Before bringing a civil action for statutory penalties, an employee must comply with Labor Code section 2699.3. ( Lab. Code, § 2699, subd. (a).) That statute requires the employee to give written notice of the alleged Labor Code violation to both the employer and the Labor and Workforce Development Agency, and the notice must describe facts and theories supporting the violation. ( Id ., § 2699.3, subd. (a).) If the agency notifies the employee and the employer that it does not intend to investigate ..., or if the agency fails to respond within 33 days, the employee may then bring a civil action against the employer. ( Id ., § 2699.3, subd. (a)(2)(A).) If the agency decides to investigate, it then has 120 days to do so. If the agency decides not to issue a citation, or does not issue a citation within 158 days after the postmark date of the employee's notice, the employee may commence a civil action. ( Id ., § 2699.3, subd. (a)(2)(B).)" ( Arias, supra , 46 Cal.4th at pp. 980-981,
In Arias , the defendants argued that due process required that PAGA actions be brought as class actions because otherwise a defendant would be subject to lawsuits by multiple plaintiffs raising a common claim and none of them would be bound by a prior PAGA judgment in the defendant's favor. ( Arias, supra ,
"Because an aggrieved employee's action under the [PAGA] functions as a substitute for an action brought by the government itself, a
B. Thurman
Following Arias, in Thurman v. Bayshore Transit Management (2012)
In directly rejecting the defendant's efforts to separate the assessments expressly denominated in section 558 from the underpaid wages provided by the statute in PAGA actions, we noted that in PAGA actions a plaintiff is acting on behalf of the state and that in an action brought by the state there was no question the state could recover both the denominated assessments and underpaid wages: "Because an aggrieved employee who brings a PAGA action sues 'as the proxy or agent of the state's labor law enforcement agencies' [citation], the logical extension of defendants' argument that wages cannot be recovered as a civil penalty is that the LWDA could not seek underpaid wages on behalf of employees under section 558. However, nothing in Arias suggests that the Legislature did not intend that the LWDA be able to recover 'underpaid wages' on behalf of employees under section 558 as part of a civil penalty for Labor Code and [Industrial Welfare Commission] order violations that result in underpayment of wages. The Legislature has authorized labor law enforcement agencies to prosecute actions for wages on behalf of employees elsewhere in the Labor Code. For example, under section 1193.6, the Department of Industrial Relations or DLSE may prosecute a civil action to recover unpaid wages on behalf of employees, with or without their consent. We conclude that the Legislature similarly authorized the LWDA to recover underpaid wages on behalf employees in the form of a civil penalty under section 558. Accordingly, an aggrieved employee acting as the LWDA's proxy or agent by bringing a PAGA action may likewise recover underpaid wages as a civil penalty under section 558." ( Thurman, supra , 203 Cal.App.4th at pp. 1147-1148,
C. Concepcion
In Concepcion,
D. Iskanian
Shortly after Concepcion was decided, in Iskanian, the court found that an employee's prior agreement to waive the right to bring a " 'representative action' " does not prevent an employee from bringing a PAGA action. ( Iskanian, supra , 59 Cal.4th at pp. 387-388,
Given its fundamental nature as a means of enforcing claims which belong to the state, the court found that the right to bring a PAGA claim was not limited by the FAA. "The FAA aims to promote arbitration of claims belonging to the private parties to an arbitration agreement. It does not aim to promote arbitration of claims belonging to a government agency, and that is no less true when such a claim is brought by a statutorily designated proxy for the agency as when the claim is brought by the agency itself. The fundamental character of the claim as a public enforcement action is the same in both instances. We conclude that California's public policy prohibiting waiver of PAGA claims, whose sole purpose is to vindicate the [Labor and Workforce Development] Agency's interest in enforcing the Labor
The court in Iskanian was very cognizant of the United States Supreme Court's holding in Concepcion . Thus, the court in Iskanian took some pains to illustrate how a PAGA claim did not interfere with arbitration and hence was not preempted by the FAA. The court first set forth the critical distinction between civil penalties recoverable in a PAGA action and victim specific relief recoverable by individual employees. "The civil penalties recovered on behalf of the state under the PAGA are distinct from the statutory damages to which employees may be entitled in their individual capacities. Case law has clarified the distinction 'between a request for statutory penalties provided by the Labor Code for employer wage-and-hour violations, which were recoverable directly by employees well before the [PAGA] became part of the Labor Code, and a demand for "civil penalties," previously enforceable only by the state's labor law enforcement agencies. An example of the former is section 203, which obligates an employer that willfully fails to pay wages due an employee who is discharged or quits to pay the employee, in addition to the unpaid wages, a penalty equal to the employee's daily wages for each day, not exceeding 30 days, that the wages are unpaid. [Citation.] Examples of the latter are section 225.5, which provides, in addition to any other penalty that may be assessed, an employer that unlawfully withholds wages in violation of certain specified provisions of the Labor Code is subject to a civil penalty in an enforcement action initiated by the Labor Commissioner in the sum of $100 per employee for the initial violation and $200 per employee for subsequent or willful violations, and section 256, which authorizes the Labor Commissioner to "impose a civil penalty in an amount not exceeding 30 days
The court then, in a later portion of its opinion, stated: "Our opinion today would not permit a state to circumvent the FAA by, for example, deputizing employee A to bring a suit for the individual damages claims of employees B, C, and D. This pursuit of victim-specific relief by a party to an arbitration agreement on behalf of other parties to an arbitration agreement would be tantamount to a private class action, whatever the designation given by the Legislature. Under Concepcion , such an action could not be maintained in the face of a class waiver. Here, importantly, a PAGA litigant's status as 'the proxy or agent' of the state [citation] is not merely semantic; it reflects a PAGA litigant's substantive role in enforcing our labor laws on behalf of state law enforcement agencies. Our FAA holding applies specifically to a state law rule barring predispute waiver of an employee's right to bring an action that can only be brought by the state or its representatives, where any resulting judgment is binding on the state and any monetary penalties largely go to state coffers." ( Iskanian, supra , 59 Cal.4th at pp. 387-388,
Following Iskanian, the court in Williams v. Superior Court (Pinkerton) (2015)
Recently, the court in Lopez v. Friant (2017)
E. Analysis
1. Section 558 Claims are PAGA Claims
Section 2699 subdivision (a) provides: "Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3."
Section 558, by its terms and as we interpreted it in Thurman , expressly provides for civil penalties and hence claims under section 558, including claims for underpaid wages, are cognizable under the PAGA. As our holding in Thurman makes clear, the $50 and $100 assessments as well as the compensation for underpaid wages provided for by section 558 subdivisions (a) and (b) are, together, the civil penalties provided by the statute.
In this regard, we respectfully part company with the views recently expressed by our colleagues in the Fifth District in Esparza v. KS Industries (2017)
The court in Esparza also found that in light of Iskanian , our opinion in Thurman was no longer an impediment to severance of underpaid wage claims brought under section 558. ( Esparza,
Our initial point of departure from Esparza is the opinion's apparent conclusion that the plaintiff could pursue relief under section 558 in his own right. ( Esparza,
We also disagree with Esparza's treatment of our opinion in Thurman . While we agree Thurman was decided before Iskanian, and that in Thurman we had no occasion to address the preemption issues discussed in Iskanian , those circumstances in no sense undermine the continuing validity of our holding in Thurman, to wit: in enacting section 558, the Legislature intended
The court in Iskanian made it clear that the distinction between civil penalties and victim specific statutory damages hinges in large measure on whether, prior to enactment of the PAGA, they could only be recovered by way of regulatory enforcement or whether they supported a private right of action. (See Iskanian, supra ,
We of course recognize that in finding no FAA preemption, the court in Iskanian also relied on the fact the penalties it was considering were "largely" payable to the state. ( Iskanian, supra , 59 Cal.4th at pp. 387-388,
In sum, because, prior to enactment of PAGA there was no private remedy under section 558 and because there is no basis upon which to conclude that
2. The Trial Court Erred
Because claims under section 558 are indivisible claims for civil penalties, the trial court's order bifurcating Lawson's PAGA claim between the denominated assessments and underpaid wages was erroneous, as was its further order directing that the underpaid wages be arbitrated as a representative action. As we have discussed, the courts in Iskanian, Williams and Reyes have held that an individual employee's prior arbitration agreement is no impediment to the employee's right to bring a distinct civil enforcement action under the PAGA, notwithstanding the fact that the employee may have waived his or her right to bring class or representative claims against his or her employer. As those cases make clear, in bringing a PAGA action an employee is not acting on his or her own behalf, but on behalf of the state and the state is not bound by the employee's prior agreement, including any
PAGA claims are not only outside the scope of a plaintiff's prior arbitration agreement under the terms of the statute itself and Iskanian , arbitration of such a representative claim also appears to run afoul of the principles set forth in Concepcion . In particular, arbitration of a PAGA claim, which as the trial court noted, is always a representative claim, would deprive defendants of the ability to challenge rulings on the merits and de novo, posing for defendants considerable and unexpected risks. (See Concepcion,
Accordingly, we must direct that the trial court vacate its order and enter a new order denying Z.B.'s motion to arbitrate. Contrary to ZB's contention we have no power to direct that the trial court modify its order so that Lawson be compelled to arbitrate an individual underpaid wage claim. As the cases emphasize, under the PAGA Lawson is acting as a representative of the state, which has not agreed to arbitrate its claim for civil penalties. ( Williams, supra ,
DISPOSITION
The appeal is dismissed. Let a peremptory writ of mandate issue commanding the trial court to vacate its order bifurcating Lawson's claims and
WE CONCUR:
HUFFMAN, J.
HALLER, J.
Notes
All references to ZB include defendant and appellant Zions Bancorporation.
All further statutory references are to the Labor Code, unless otherwise indicated.
Section 558 provides: "(a) Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty as follows:
"(1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.
"(2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.
"(3) Wages recovered pursuant to this section shall be paid to the affected employee.
"(b) If upon inspection or investigation the Labor Commissioner determines that a person had paid or caused to be paid a wage for overtime work in violation of any provision of this chapter, any provision regulating hours and days of work in any order of the Industrial Welfare Commission, or any applicable local overtime law, the Labor Commissioner may issue a citation. The procedures for issuing, contesting, and enforcing judgments for citations or civil penalties issued by the Labor Commissioner for a violation of this chapter shall be the same as those set out in Section 1197.1.
"(c) In a jurisdiction where a local entity has the legal authority to issue a citation against an employer for a violation of any applicable local overtime law, the Labor Commissioner, pursuant to a request from the local entity, may issue a citation against an employer for a violation of any applicable local overtime law if the local entity has not cited the employer for the same violation. If the Labor Commissioner issues a citation, the local entity shall not cite the employer for the same violation."
"(d) The civil penalties provided for in this section are in addition to any other civil or criminal penalty provided by law.
"(e) This section does not change the applicability of local overtime wage laws to any entity."
The rationale for this disparate treatment of orders denying motions to compel and orders granting such motions is fairly straightforward: the utility and efficiency of arbitration would be entirely lost if a litigant attempting to enforce an arbitration provision were required to litigate a claim on the merits in a judicial forum before challenging an improper order denying a motion to compel; conversely if, in general, orders compelling arbitration were appealable, the prompt resolution of claims by way of arbitration would be substantially undermined. (Wheeler v. St. Joseph Hospital (1976)
Our conclusion with respect to preemption is without prejudice to ZB's right to show, on a fuller factual record, that preemption should apply here.