In Hernandez v. Ross Stores, ___ Cal.App.4th ___ (January 3, 2016), the California Court of Appeal (Fourth Appellate District, Division Two) affirmed the order of the San Bernardino County Superior Court (Judges Waters and Riemer) denying defendant employer’s motion to compel arbitration of plaintiff employee’s lawsuit to recover penalties under the California Private Attorney General Act (“PAGA”).
Plaintiff was a former employee of defendant who filed a single-count representative action under PAGA, Labor Code section 2698 et. seq., alleging numerous violations of the California Labor Code. Defendant moved to compel arbitration on the ground that plaintiff must first arbitrate her individual disputes showing she was an “aggrieved party” under PAGA and then the PAGA action could proceed in court. Relying on Iskanian v. CLS Transportation Los Angeles LLC 59 Cal.4th 348, 387 (2014), the trial court denied the motion on the ground that the PAGA claim was a representative action brought on behalf of the state and did not include individual claims. Thus, there were no individual claims or disputes between plaintiff and defendant that could be separately arbitrated.
The appellate court agreed with the trial court, finding that plaintiff’s PAGA claim was “not a dispute between the employer and employee. Rather, this is a representative action and [plaintiff] is acting on behalf of the state.” In other words, “this dispute does not involve an individual claim by [plaintiff] regarding the Labor Code violations but rather an action brought for civil penalties under PAGA for violating the Labor Code. There are no ‘disputes’ between the employer and employee as stated in the arbitration policy.” Furthermore, “there is no authority supporting [defendant]’s argument that an employer may legally compel an employee to arbitrate the individual aspects of his PAGA claim while maintaining the representative claim in court.”