Case Information
*1 Filed 3/28/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
ARTHUR ZAKARYAN, B289192 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. BC647541) v.
THE MEN'S WEARHOUSE,
INC., et al.,
Defendants and
Appellants. APPEAL from an order of the Superior Court of Los Angeles County. Richard E. Rico, Judge. Affirmed.
Gartenberg Gelfand Hayton, Aaron C. Gundzik, and Rebecca G. Gundzik for Plaintiff and Respondent.
Lebe Law, and Jonathan M. Lebe for Plaintiff and Respondent.
Carothers DiSante and Freudenberger, and Amy S.
Williams for Defendants and Appellants.
Vorys, Sater, Seymour and Pease, Mark A. Knueve, and Cory D. Catignani for Defendants and Appellants.
* * * * * *
The Labor Code Private Attorneys General Act of 2004
(PAGA) deputizes individual employees to step into the shoes of
our state’s labor enforcement agency and sue their employers for
underpaid wages and additiоnal, statutorily prescribed amounts
on behalf of themselves and their aggrieved coworkers. (Lab.
Code, § 2698 et seq
.
)
[1]
In
Iskanian v. CLS Transportation Los
Angeles, LLC
(2014)
All further statutory references are to the Labor Code 1 unless otherwise indicated.
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 pеrformance 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 aсtion[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 class, collective, or representative action,” but that agreement expressly excluded any PAGA claims “otherwise covered by this Agreement.”
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 *4 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 of all aggrieved employees,” the additional penalties incorporated into PAGA from more specific Labor Code provisions, prejudgment interest, attorney fees and “further and other injunctive and equitable relief.”
After Esparza was decided, The Men’s Weаrhouse 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 оf 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
, 13 Cal.App.5th at
p. 1234), while most others have said it is not (
Lawson
,
supra
, 18
Cal.App.5th at p. 712;
Williams v. Superior Court
(2015) 237
Cal.App.4th 642, 649 (
Williams v. Superior Court
);
Betancourt v.
*5
Prudential Overall Supply
(2017)
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 tо 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
The federal courts interpreting California law are no less
2
divided. (Compare
Mandviwala v. Five Star Quality Care, Inc.
(9th Cir. 2018) 723 F. App’x. 415, 417-418 [PAGA claim may be
split] with
Whitworth v. SolarCity Corp.
(N.D. Cal. 2018) 336 F.
Supp. 3d 1119, 1124-1126 [PAGA claim may not be split].)
*6
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
statutory premium pay rate means that the employee’s pay
checks are inaccurate and, if the employee quits or is fired, may
mean that he was willfully not paid the full amount of his unpaid
wages when he departed, each of which constitutes a separate
Labor Code violation with its own additional penalty. (§§ 226,
subds. (a)(1), (a)(2), (a)(5) & (a)(9), 203; see
Maldonado v. Epsilon
Plastics, Inc.
(2018)
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. (11))(A) & (12)(A) [mercantile industry].) These rules also do nоt apply to “executive, administrative, and professional employees.” (§ 515, subd. (a); Cal. Code Regs., tit. 8, § 11070, subd. (1)(A).) If an employer does not comply with the meal and rest break rules applicable to non-exempt employees, an employee is entitled to an additional hour’s pay for each workday that a meal or rest period was not offered. (§ 226.7, subd. (c).)
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
аdministrative 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
*8
ovеrtime compensation”], 1194.5 [authorizing suit for injunctive
relief], 217 [authorizing suit to recover penalties].) For violation
of the overtime and meal and rest period rules, section 558
specifies what the commissioner may recover—namely, (1)
underpaid wages, and (2) an additional $50 for the first violation
against
each
employee for
each
pay period, and $100 for any
subsequent violation against
each
employee for
each
pay period.
(§ 558, subd. (a).) Any “[w]ages recovered” under section 558 go
to the “affected employee” (§ 558, subd. (a)(3)); all the rest goes to
the Labor and Workforce Development Agency (the agency)
(§ 558, subd. (b);
Iskanian
,
supra
,
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 ( ,
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) 561 U.S. 63, 67 [“arbitration is a matter of contract”].) Such contracts are enforceable as a matter of federal law under the Federal Arbitration Act (FAA). (9 U.S.C. § 2 [“A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of the contract.”]; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344 [“The ‘principle purpose’ of the FAA is to ‘ensur[e] that private arbitration agreements are enforced according to their terms.’ [Citation.]”]; Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612, 1632 ( Epic Systems ) [“Congress has instructed that arbitration agreements [between private employers and employees] must be enforced as written.”].)
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 that splitting a PAGA claim in this manner is both (1) legally impermissible and (2) inconsistent with labor and arbitration law.
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 impermissibly divides a single
primary right. That is because an individual employee bringing a
PAGA claim is vindicating one
and only one
“particular injury”—
namely, the injury to the public that the “state labor law
enforcement agencies” were created to safeguard. (
Arias
,
supra
,
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 dеfines what the “civil
penalty” is for violations of the overtime and meal and rest period
rules—namely, a per-pay-period penalty of $50 or $100 “in
addition to an amount sufficient to recover underpaid wages”
(§ 558, subds. (a)(1) & (a)(2)). (See
Equilon Enterprises v.
Consumer Cause, Inc.
(2002)
The Men’s Wearhouse argues that there is no inconsistency because (i) seсtion 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) 60
Cal.4th 940, 960-961 (
State Department
); Stats. 2003, ch. 906, § 2,
p. 6629, eff. Jan. 1, 2004 [PAGA]; Stats. 1999, ch. 134, § 14, pp.
1826-1827 [section 558].) However, neither PAGA nor section
558 is more specific than the other because each statute deals
with its own distinct (and hence equally specific) subject: Section
558 sets the default “civil penalty” for certain Labor Code
violations and defines how to allocate the civil penalty recovered
when the agency is the plaintiff, while PAGA authorizes
aggrieved employees to bring suit as the agency’s proxy and
defines how to allocate the “civil penаlty” recovered when that
employee is the plaintiff bringing a PAGA claim. This result is
also dictated by the structure of PAGA. PAGA borrows the
*17
penalty amounts from the various Labor Code statutes that it
empowers an individual employee to vindicate on behalf of the
agency, but PAGA provides the overarching procedural rules that
govern such employee-prosecuted claims. (Accord,
Amalgamated
Transit
,
supra
,
With regard to the second premise, and as we explain above, the text of section 558 defines a single “civil penalty.” (See also Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1145 ( Thurman ) [section 558’s “civil penalty . . . consists of both the $50 or $100 penalty amount and any underpaid wages”].) That section 558 refers to the per-pay-period penalties as being “in addition to” the underpaid wages does not create two separate remedies; instead, it defines two components of a singular “civil penalty” that is recoverable in a PAGA action. Nor, as The Mеn’s Warehouse urges, does the per-pay-period penalty somehow become a separate “penalty” distinct from underpaid wages because the per-pay-period penalty is a fixed amount or because it can be called a “civil penalty” rather than “statutory [damages]”; a single civil penalty can be made up of components that include fixed amounts ( Murphy , supra , 40 Cal.4th at pp. 1112-1113) and the semantics of assigning labels to the components of a statute’s penalty cannot trump the statute’s textual creation of a single penalty ( , 59 Cal.4th at p. 388).
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 еmployee’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
*19
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
,
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. held that
Although plaintiff initially alleged his entitlement to “all
3
underpaid wages recovered” under PAGA, that allegation does
not bear on his election to pursue a solitary PAGA сlaim 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)
C. Esparza and Lawson
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
,
* * * * * *
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.
CERTIFIED FOR PUBLICATION.
______________________, J. HOFFSTADT We concur:
_________________________, Acting P.J.
ASHMANN-GERST
_________________________, J.
CHAVEZ