2020 presented a myriad of challenges for California employers, including the constant march of California court opinions regarding the Private Attorneys General Act (PAGA) claims.

The California courts focused on two issues involving PAGA this year:

• Can a Plaintiff proceed with their PAGA claim (standing)?

• Can a Defendant compel arbitration when there is a PAGA claim?

Standing Cases

The biggest PAGA standing decision in 2020 was from the California Supreme Court in Kim v. Reins International California, Inc. The issue before the court was, does an employee bringing an action under PAGA lose standing to pursue representative claims as an “aggrieved employee” by settling and dismissing his or her individual claims against the employer? The Court concluded that no, settlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies.

The California Court of Appeal had several decisions pertaining to PAGA standing. In Starks v. Vortex Industries, Inc. Plaintiff Starks filed notice with the Labor & Workforce Development Agency (LWDA) alleging various Labor Code violations and eventually filed a Complaint alleging a PAGA cause of action against Vortex. Over a year later, Plaintiff Herrera filed a substantially identical PAGA action against Vortex.

Plaintiff Starks settled with Vortex and Plaintiff Herrera moved to intervene and set aside the judgment. The Court of Appeal agreed with the trial court that Plaintiff Herrera’s motion was untimely and as an agent of the LWDA could not attack the judgment.

In Robinson v. Southern Counties Oil Company, the Court of Appeal agreed with the trial court holding. The trial court had previously sustained without leave to amend a demurrer to Plaintiff’s amended complaint holding that Plaintiff was barred from bringing a PAGA action asserting the same claims that were settled in a prior class action/PAGA case that he opted out of. Moreover, the trial court held he lacked standing to bring a representative action on behalf of employees employed during the period when he was no longer employed by Southern Counties.

Arbitration and PAGA

Provost v. YourMechanic, Inc., is a decision that straddles the line between standing and arbitration. YourMechanic sought to compel the plaintiff to arbitrate whether he was an “aggrieved employee” within the meaning of the Labor Code before he could proceed with his single-count representative action under PAGA that alleged various Labor Code violations against the company. The Court of Appeal concluded that a PAGA-only representative action is not an individual action at all, but instead is one that is indivisible and belongs solely to the State of California. Therefore, YourMechanic could not require the plaintiff to submit by contract any part of his representative PAGA action to arbitration.

In Olabi v. Neutron Holdings, Inc., the plaintiff sued Neutron Holdings (dba Lime) for Labor Code violations under the PAGA and unfair competition regulations. The plaintiff claimed Lime intentionally misclassified him and other independent contractors resulting in violations of the Labor Code. Lime filed a petition to compel arbitration. Before the hearing on the motion to compel arbitration, the plaintiff dismissed his unfair competition claim with prejudice and disavowed any victim-specific relief. The trial court denied the petition to compel arbitration. Because the language of the arbitration agreement broadly excluded PAGA actions and the PAGA claim was the only claim remaining in the action, the Court of Appeal concluded that the trial court did not err in denying the petition to compel arbitration.

In Brooks v. Amerihome Mortgage Company, LLC, the plaintiff filed a PAGA notice with the Labor Workforce Development Agency, asserting wage violations under the Labor Code. In response, AmeriHome filed a demand to arbitrate the plaintiff’s claims on an individual basis. Following the expiration of the required PAGA notice period, the plaintiff filed a first amended complaint on behalf of himself and other alleged aggrieved employees of AmeriHome asserting a single cause of action under PAGA and moved for a preliminary injunction enjoining the arbitration. The trial court granted the preliminary injunction, reasoning that allowing the arbitration to proceed would impermissibly split a single, pure PAGA claim into an arbitrable individual claim and a non-arbitrable representative claim. The Court of Appeal agreed and affirmed the trial court’s decision.

In Jarboe v. Hanlees Auto Group, the Court of Appeal held that one of the defendants could compel arbitration with respect to the plaintiff’s individual Labor Code claims. However, the Court of Appeal also held that the arbitration agreement could not be enforced for the plaintiff’s PAGA claim because the PAGA claim belongs to the State of California and cannot be the subject of the parties’ private arbitration agreement. In addition, the Court of Appeal held that the arbitration agreement did not cover the other 15 defendants in the action based on either the third-party beneficiary doctrine or equitable estoppel. Finally, the Court of Appeal held that the trial court did not abuse its discretion in refusing to stay the PAGA action pending the resolution of the arbitration between the plaintiff and the one defendant.