Private Attorney General Act (PAGA) Waivers may be Enforceable in Federal Courts
In the June 2014 Iskanian decision, the California Supreme Court carved out an exception to the general rule that class action waivers in arbitration agreements are valid, and concluded that the right to bring representative Private Attorney General Act (“PAGA”) claims cannot be waived through arbitration agreements. PAGA allows individual workers to pursue Labor Code violations against employers in a representative action on behalf of government authorities.
The Supreme Court’s “carve out” for PAGA claims in Iskanian was soundly rejected by a federal court on October 17, 2014. Langston v. 20/20 Companies, Case No. EDCV 14-1360 JGB (C.D.Cal., Oct. 17, 2014). Judge Bernal, a federal judge in the Central District, granted the motion of 20/20 Communications to compel arbitration in a putative class action and found that the plaintiffs were bound by arbitration agreements requiring individual arbitration of employment claims, including PAGA claims.
Judge Bernal became the latest federal judge to rule against the California Supreme Court’s Iskanian decision in finding that the PAGA claims were preempted by the Federal Arbitration Act (“FAA”). Judge Bernal found that the FAA “preempts California’s rule against arbitration agreements that waive an employee’s right to bring representative PAGA claims.”
Four federal district courts have now found preemption by the FAA. Although California state courts are bound by the Iskanian decision holding that the provisions are unenforceable as a matter of public policy, each federal district court is free to analyze the issue independently. As a result, these federal decisions have injected uncertainty regarding the future of PAGA arbitration waivers. Given the federal trend favoring the enforcement of arbitration provisions, and the recent federal court decisions, California employers facing this issue likely will remove their cases to federal court, whenever possible.