Employers have argued vigorously to limit the use of PAGA because they can face stiff penalties for violations of California labor law. They have been successful, especially at the U.S. Supreme Court level. The California Court of Appeal’s decision may prove to be an ingenious, if limited, way for workers to preserve some of PAGA’s usefulness.
Violations of the California Labor Code
Parra worked for Packers Sanitation Services, a food safety solutions company, from April 2019 to July 2021. In February 2022, Parra—acting “in a Representative Capacity only” filed a complaint against Packers for civil penalties under PAGA. He alleged that Packers had violated meal, rest period and other obligations created by the Labor Code and California Code of Regulations.
Only on others’ behalf
Parra claimed that Packers committed these violations against Parra “and all other aggrieved employees.” In March 2022, Packers moved to compel arbitration based on an agreement Parra assertedly signed shortly after he was hired. The agreement stated, in part, “I and the Company agree to utilize binding individual arbitration as the sole and exclusive means to resolve all disputes that may arise out of or be related in any way to my employment ….I and the Company each specifically waive and relinquish our respective rights to bring a claim against the other in a court of law and to have a trial by jury.” It also stated, “I agree that any claims brought under this binding arbitration Agreement shall be brought in the individual capacity of myself or the Company.”
Notably, although Parra alleges that he and other workers were harmed, he asks the court to address only the harm suffered by others. This is sometimes known as a “headless PAGA action.” But why did he do it this way?
Part of his strategy may be based on an underlying dispute about whether he signed the arbitration agreement or whether his signature was added later by someone else. A more important reason has to do with the peculiar limits the U.S. Supreme Court has placed on access to the court system.
Not about altruism
The Supreme Court has a longstanding policy of favoring the enforcement of arbitration agreements. This rests on a basic contract argument – if someone agrees to do something, they should be held to terms of their agreement or made to pay up. If there is no other reason to doubt the validity of the contract, arbitration agreements should be treated the same way.
In 2014, in Iskanian v. CLS Transportation the California Supreme Court carved out a major exception to that rule for PAGA claims brought on behalf of plaintiffs other than the individual bringing the claim — otherwise known as “representative claims.” The rationale is that if other employees were not parties to the arbitration contract and did not agree to waive their “rights to bring a claim against the other in a court of law and to have a trial by jury,” then they are not bound by it.
On June 15, 2022 in Viking River Cruises, Inc. v. Moriana, the U.S. Supreme Court reversed Iskanian. Further, Viking River Cruises holds that when an individual PAGA claim is compelled to arbitration, the representative PAGA claims that remain should be dismissed for lack of statutory standing. In Adolph v. Uber Technologies Inc., the California Supreme Court disagreed to hold that an employee who has been forced to arbitrate individual PAGA claims can still pursue representative PAGA claims in court. It’s been a PAGA slugfest between federal and California courts since then.
California Court of Appeal tiptoes in to thread the needle
This is where it gets complicated. The Court of Appeal decided one thing and declined to offer more than tentative advice on one more, tossing a definitive decision to another court in the future.
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First, the Court of Appeal decided that the representative claims in Parra did not need to go to arbitration for the reason advanced in Iskanian. Secondly, it offered a tentative conclusion that a headless PAGA claim – one in which the lead plaintiff alleges that he or she has been injured but does not personally seek a remedy – is enough to establish standing in court.
This conclusion challenges a 2024 Court of Appeal decision in Leeper v. Shipt, Inc. but does not overrule it. This issue, the Parra court announced, was not appropriate to decide on the defendant’s motion to compel arbitration. That is a battle to be fought another day, which it surely will be.
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