California Court of Appeal Confirms that PAGA Claims Cannot be Compelled to Arbitration
Even after the Supreme Court’s favorable decision in Epic Systems Corp. v. Lewis (“Epic”), California courts will not compel a PAGA claim to arbitration.
In Collie v. The Icee Co., a former employee of The Icee Company, Tauran Collie, alleged a single cause of action under California’s Private Attorney General Act (“PAGA”) against her former employer. The Icee Company attempted to compel Collie’s claim to arbitration based on a broadly worded pre-dispute arbitration agreement that Collie signed when he began his employment.
The Icee Company argued that two decisions which held that PAGA claims could not be compelled to arbitration, Betancourt and Iskanian, were no longer good law after the United States Supreme Court’s decision in Epic, which held that class action waivers in arbitration agreements must be enforced and individual arbitration must be compelled if the agreement contains such a provision.
The Court of Appeal was not persuaded that Epic should change the court’s analysis of PAGA claims. It held that “Epic does not address ‘the unique nature of a PAGA claim’—that is, the ‘PAGA litigant’s status as ‘the proxy or agent’ of the state’ and his or her ‘substantive role in enforcing our labor laws on behalf of state law enforcement agencies.’” Thus, Epic does not “undermine Iskanian’s or Betancourt’s characterization of PAGA claims as law enforcement actions in which plaintiffs step into the shoes of the state.” And because Collie had yet to step into those shoes, he could not have agreed to arbitrate on behalf of the state when he signed the arbitration agreement. The Court simply held that because the state did not agree to arbitrate its PAGA claim, “Icee cannot enforce a contractual provision to bind a nonparty [the state].”
PAGA’s unique nature has, at least for the time being, immunized PAGA claims for arbitration, and it appears that will be the case for the foreseeable future, much to the chagrin of California employers.