FACTS AND PROCEDURAL BACKGROUND
I. Facts
Arthur Zakaryan (plaintiff) started working as a store manager for defendants, The Men's Wearhouse and Tailored Brands, Inc. (collectively, The Men's Wearhouse) in November 2002. As its homophonic name suggests, the Men's Wearhouse sells men's clothing and accoutrement. Due to work performance issues, The Men's Wearhouse in early 2016 gave plaintiff the option of accepting a demotion out of management or resigning. Plaintiff opted to resign, and did so in February 2016.
By the time of his resignation, plaintiff had signed or by his conduct agreed to two different arbitration agreements with The Men's Wearhouse-one in 2006 and a second in 2015. Under the terms of the 2006 agreement, plaintiff agreed to arbitrate "any and all claims, disputes and controversies ... includ[ing] ... any [c]laim arising from [his] employment ... or its termination," but that agreement expressly excluded "collective" or "representative action[s]." Under the terms of the 2015 agreement, plaintiff agreed to arbitrate "all claims or controversies ... whether or not arising out of [his] employment (or its termination)" and to "waive any right to bring" "any
II. Procedural Background
In January 2017, plaintiff sued The Men's Wearhouse. "[O]n behalf of all aggrieved employees currently and formerly employed" as The "Men's Wearhouse store managers," plaintiff alleged a "representative action" under PAGA on the ground that The Men's Wearhouse had wrongly misclassified managers as exempt from California's laws regarding overtime pay and meal and rest breaks. This underpayment also rendered the managers' wage statements inaccurate and entitled those who had quit or been fired to "waiting time penalties" under section 203. Plaintiff prayed for "unpaid and underpaid wages
After Esparza was decided, The Men's Wearhouse filed a motion to compel arbitration of the portion of plaintiff's PAGA claim seeking reimbursement of underpaid wages. The motion to compel was filed nearly six months after The Men's Wearhouse had answered plaintiff's complaint without raising arbitration as a defense.
Following full briefing and a hearing, the trial court denied the motion to compel. The court found Lawson more persuasive than Esparza , and in so doing rejected the notion that plaintiff's PAGA claim could be split in order to send the underpaid wages portion to arbitration.
The Men's Wearhouse filed this timely appeal.
DISCUSSION
The Men's Wearhouse challenges the trial court's refusal to order arbitration of the portion of plaintiff's PAGA claim that seeks to recover his underpaid wages. As noted above, the California courts currently disagree about a trial court's authority to order a portion of a PAGA claim to arbitration: One case says this is permissible ( Esparza , supra ,
I. Pertinent Background Law
A. California labor law
1. Substantive protections
California labor law grants employees two protections relevant to this appeal.
The law prohibits employers from requiring their employees to work more than eight hours in a day, 40 hours in a week or six days in a row at their regular hourly rate of pay (the overtime rules). (§ 510, subd. (a).) These rules do not apply to (and therefore exempt) "executive, administrative, and professional employees." (§ 515, subd. (a).) If an employer does not comply with the overtime rules applicable to a non-exempt employee, that employee is entitled to premium pay of 1.5 times his regular hourly pay, and to twice his regular hourly pay if required to work more than 12 hours in a day or more than eight hours on the seventh day in a row. (§ 510, subd. (a).) What is more, the employer's failure to compensate the employee at the
The law also requires that employers afford their employees meal and rest periods during any shift longer than five hours (for meal periods) and three and one-half hours (for rest periods) (the meal and rest period rules). (§§ 226.7, subd. (b), 512, subd. (a); Cal. Code Regs., tit. 8, § 11070, subds.
2. Enforcement mechanisms
a. Pre-PAGA mechanisms
Traditionally, the Labor Code provides several mechanisms for three different actors to enforce the above described labor laws.
First, the aggrieved employee may seek judicial or administrative relief. In terms of judicial relief, the employee may "file[ ] an ordinary civil action against the employer" for (1) breach of contract ( Reynolds v. Bement (2005)
Second, the Labor Commissioner may initiate proceedings against the employer. (§§ 1193.6 [authorizing suit for "unpaid overtime compensation"], 1194.5 [authorizing suit for injunctive relief], 217 [authorizing
Third, the local prosecuting authority may prosecute the employer because the violations of some provisions of the Labor Code are designated as misdemeanors (e.g., §§ 215, 216, 218) or infractions (e.g., § 226, subd. (c)).
b. PAGA
Recognizing that the enforcement authorities had insufficient incentive and resources to sue employers for Labor Code violations ( Iskanian , supra ,
Nearly every contour of a PAGA claim flows from the ineluctable premise that a PAGA action is " 'fundamentally a law enforcement action designed to protect the public and not to benefit private parties.' " ( Arias , supra,
B. Arbitration law
Private parties, including employers and employees, may generally agree by contract to resolve their disputes through arbitration. ( Rent-A-Center W., Inc. v. Jackson (2010)
In Iskanian , supra ,
II. Analysis
The trial court's denial of the motion to compel arbitration turns on whether an individual employee's PAGA claim seeking remedies available to the agency under section 558 may be split into two claims based on the remedies sought-with the claim for underpaid wages under section 558 being shunted to arbitration while the claim for the further $50 and $100 per-pay-period penalties under section 558 remaining in court. We conclude
A. Impermissible claim splitting
California follows the primary rights theory. This theory provides that " 'one injury gives rise to only one claim for relief' " ( Boeken v. Philip Morris USA, Inc. (2010)
Splitting a PAGA claim into two claims-a claim for underpaid wages and a claim for the $50/$100 per-pay-period penalties PAGA incorporates from section 558-runs afoul of the primary rights doctrine because it
Contrary to what The Men's Wearhouse argues, our conclusion is consistent with Broughton v. Cigna Healthplans (1999)
B. Inconsistency with labor and arbitration law
Even if the primary rights doctrine did not categorically bar a court from splitting a PAGA claim and sending the portion seeking underpaid wages to arbitration, such a procedure cannot be reconciled with labor law or arbitration law.
1. Labor law
There are three reasons why splitting an individual PAGA claim into a claim for underpaid wages and a claim for "civil penalties" cannot be squared with the labor law that PAGA is designed to enforce.
First, PAGA awards the "aggrieved employee"-plaintiff a single, indivisible civil penalty that is to be split between the agency (which receives 75 percent) and the "aggrieved employee[s]" (who receive 25 percent). (§ 2699, subds. (a) & (i).) PAGA empowers the employee-plaintiff to "recover" the "civil penalty" that would otherwise "be assessed and collected by the" agency (§ 2699, subd. (i)), and section 558 defines what the "civil penalty" is for violations of the overtime and meal and rest
The Men's Wearhouse argues that there is no inconsistency because (i) section 558 supersedes PAGA's 75/25 percent allocation rule, and (ii) section 558 creates two separate penalties (namely, an underpaid wages penalty and a per-pay-period penalty) rather than a single, indivisible penalty, and expressly provides that the underpaid wages penalty "shall" be allocated to "the affected employee[s]" (§ 558, subd. (a)(3)). We reject this argument because both of its premises are invalid.
With regard to the first premise, PAGA's allocation rule trumps section 558's. This result is dictated by the rules of statutory construction. PAGA, as the later-enacted statute, supersedes section 558 unless section 558 is the more specific statute. ( State Dept. of Public Health v. Superior Court (2015)
With regard to the second premise, and as we explain above, the text of section 558 defines a single "civil penalty." (See also
Second, a PAGA claim is, fundamentally, a representative claim. As noted above, the "aggrieved employee" who brings a PAGA claim is representing the agency and, while proceeding in the agency's stead, is also representing all of the other aggrieved employees. ( Julian , supra ,
Third, an aggrieved employee's choice to bring a solitary PAGA claim is his choice to make. As noted above, an aggrieved employee desiring to pursue judicial (rather than administrative) relief for his employer's violation of the overtime or meal and rest period rules has the option of (1) filing a lawsuit asserting a claim in his individual capacity (§§ 1194, 218) or (2) filing a lawsuit asserting a PAGA claim (§ 2699). If he chooses the former, the employee gets to keep all of his awarded underpaid wages, but the claim is subject to arbitration if he has so agreed. (§§ 1194, 218; Iskanian , supra ,
2. Arbitration law
Splitting an individual PAGA claim into a claim for underpaid wages and a claim for "civil penalties" also cannot be squared with the law governing arbitration. Iskanian held that arbitration of a PAGA claim is "contrary to public policy" and that contracts purporting to mandate arbitration of PAGA claims are "unenforceable as a matter of ... law." ( Iskanian , supra , 59 Cal.4th at pp. 360, 382-384,
Our resolution of the question presented in this case puts us at odds with Esparza and, to a lesser extent, with Lawson . Esparza held that a PAGA claim may be split and the portion seeking underpaid wages sent to arbitration because, in Esparza 's words, the portion seeking underpaid wage "retain[s] [its] private nature." ( Esparza , supra ,
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In light of our conclusion that the trial court properly denied the motion to compel arbitration, we have no occasion to reach plaintiff's proffered alternative grounds for affirmance-namely, that the 2015 arbitration agreement did not require arbitration of PAGA claims, that the 2006 arbitration agreement applied, and that The Men's Wearhouse waived the right to seek arbitration by not filing its motion until Esparza was decided.
DISPOSITION
The order is affirmed. Plaintiff is entitled to his costs on appeal.
We concur:
ASHMANN-GERST, Acting P.J.
CHAVEZ, J.
Notes
All further statutory references are to the Labor Code unless otherwise indicated.
The federal courts interpreting California law are no less divided. (Compare Mandviwala v. Five Star Quality Care, Inc. (9th Cir. 2018)
Although plaintiff initially alleged his entitlement to "all underpaid wages recovered" under PAGA, that allegation does not bear on his election to pursue a solitary PAGA claim because he elected not to plead a separate claim for individual damages, because his legally incorrect allegation is a nullity (Fundin v. Chicago Pneumatic Tool Co. (1984)