The California Court of Appeal’s decision in LaCour v. Marshalls of CA, LLC is an important reminder that the enforceability of arbitration provisions in Private Attorneys General Act cases turns not only on federal preemption principles but, critically, on what the parties actually agreed to in their contracts and what was reasonably knowable at the time those contracts were drafted. In LaCour, a former loss prevention employee brought a single cause of action for civil penalties under PAGA on behalf of himself, other aggrieved employees, and the State of California, based on alleged wage-and-hour violations. Marshalls moved to compel arbitration based on a 2014 arbitration agreement that contained a broad class, collective, and “private attorney general representative action” waiver and a severability clause, arguing that Viking River Cruises, Inc. v. Moriana required severance and arbitration of the “individual PAGA claim” while leaving any non-individual component in court. The trial court denied Marshalls’ motion to compel, and Marshalls appealed.
Rather than wade into the post-Viking River PAGA interpretation debate, the appellate court affirmed the denial of Marshalls’ motion to compel arbitration by using basic contract-interpretation rules. Specifically, Marshalls’ 2014 arbitration agreement contained a provision that there was “no right or authority” to bring or arbitrate a PAGA representative action and added that, if the PAGA waiver was invalid, any such PAGA claim “must be litigated in a civil court of competent jurisdiction.” The agreement also included a proviso saying the PAGA waiver would be severable when a dispute was filed “as an individual action” and severance was needed to let that individual action proceed in arbitration. However, the Court of Appeal read that phrase in the context of 2014, as referring to ordinary, non-PAGA individual employment claims, not to a then-unknown category of “individual PAGA claims.” Because Iskanian v. CLS Transportation of Los Angeles, LLC still invalidates broad PAGA waivers on public policy grounds, and Viking River did not disturb that rule, the appellate court found that the PAGA waiver was unenforceable. Absent a valid waiver, the arbitration agreement required PAGA claims to stay in court rather than go to arbitration.
Marshalls urged the court to import Viking River’s federal terminology and structure, contending that every PAGA action necessarily includes an individual component and that the severability language therefore compelled arbitration of LaCour’s individual PAGA claim. The Court of Appeal rejected that approach as a hindsight reconstruction of the parties’ intent, emphasizing that arbitration remains a matter of consent and that the federal policy favoring arbitration does not authorize courts to rewrite clear contract language. The court stressed that when the agreement was executed, no California authority had embraced the idea of splitting PAGA into “individual” and “non-individual” components, and the drafters would have needed to be “clairvoyant” to have intended the precise Viking River framework years before the decision was issued. While acknowledging that California law has evolved – most notably with Adolph v. Uber Technologies, Inc., which held that an employee compelled to arbitrate an individual PAGA claim retains standing to pursue non-individual claims in court – the panel held that this evolution could not retroactively change the meaning of a 2014 contract.
The key takeaway for employers is straightforward but significant: generic PAGA waivers and severability provisions drafted before Viking River may not achieve the desired result of compelling arbitration of “individual” PAGA claims, even if they look superficially similar to the contract at issue in Viking River. Employers should closely review and, where appropriate, revise their arbitration agreements to address PAGA expressly with contemporary terminology and structure, making clear whether and how individual PAGA components are to be arbitrated, rather than relying on older language that courts may view as incapable of being applied to the post–Viking River framework.
