Prior to the United States Supreme Court’s decision in Viking River Cruises Inc. v. Moriana, California courts did not consider the components of a Private Attorneys General Act (“PAGA”) claim. In the Viking River opinion, the Court delineated between a “representative PAGA claim” – referring to a PAGA claim based on violations that employees other than the plaintiff had suffered – and an “individual PAGA claim”, which referred to a portion of a PAGA action that is “based on code violations suffered by the plaintiff.” The California Supreme Court followed this distinction by using similar terminology in subsequent PAGA cases.
For the first time, however, the California Court of Appeal recently had an occasion to discuss the implications of this apparent dichotomy in Leeper v. Shipt, Inc. In Leeper, the representative employee plaintiff had signed a binding arbitration agreement with her employer that required, in relevant part, for the employee to bring her individual claims in arbitration. To avoid this requirement, the employee filed a complaint alleging a single cause of action for penalties under PAGA. The complaint even went so far as to explicitly state: “Because [plaintiff] alleges only non-individual PAGA claims on a representative basis, [the employer] cannot compel them to arbitration.” Nevertheless, the employer moved to compel arbitration, which the trial court denied because of the lack of any alleged “individual claims.”
The Court of Appeal disagreed with the trial court. The court determined that the statutory language of the PAGA statute unambiguously provides that any PAGA action includes an individual PAGA claim. It reasoned that, “in pertinent part, section 2699 subdivision (a) describes a PAGA claim as a ‘civil action brought by an aggrieved employee on behalf of the employee and other current or former employees.’ […] [T]he clause ‘on behalf of the employee and other current or former employees’ means that the action described has both an individual claim component (plaintiff's action on behalf of the plaintiff himself or herself) and a representative component (plaintiff's action on behalf of other aggrieved employees).” (Citations omitted). The court acknowledged that its holding would open the door to a wave of employers separately compelling individual arbitrations where the Federal Arbitration Act applies, which would trigger a stay of the litigation of the representative PAGA claim and even “potentially affect the outcome of that litigation via issue preclusion.” Even so, it refused to ignore the unambiguous language of the PAGA statute.
The holding in Leeper is a win for employers. Employees cannot strategically avoid arbitration by artfully crafting a complaint that is designed to circumvent the binding agreement that should otherwise be enforced.
