Arbitration HearingIn Montano v. Wet Seal Retail, Inc., ___ Cal.App.4th ___  (January 7, 2015), the California Court of Appeal (Second Appellate District, Division Four) affirmed the order of the Los Angeles County Superior Court (Judge Hill) denying defendant’s motion to compel arbitration of plaintiff’s class action wage and hour claims.

Plaintiff filed a putative class action against defendant employer for, among other claims, failing to provide: (1) meal and rest periods; (2) regular and overtime pay; and (3) accurate itemized wage statements.  Plaintiff also asserted claims under the Private Attorneys General Act (“PAGA”).  Defendant sought to compel arbitration of plaintiff’s claims based on an arbitration agreement that plaintiff had signed during her employment. That agreement, however, contained a waiver of Plaintiff’s right to bring a PAGA action, which recent California case law has determined is unenforceable.  The agreement further provided that if the PAGA waiver were “found to be unenforceable for any reason by a court or arbitrator, then [the] entire arbitration agreement [would be] void and unenforceable by the parties.”  Accordingly, the trial court refused to enforce the entire agreement. Defendant appealed.

The appellate court agreed with the trial court, finding that the non-severability clause (i.e. if one clause is unenforceable, the entire agreement is unenforceable) compelled the invalidation of the entire arbitration agreement.  “Based on its determination that the PAGA waiver was invalid, the trial court applied the arbitration agreement’s nonseverability provision. Based on that provision, the trial court declared the entire arbitration agreement was void and unenforceable.  On appeal, [defendant] does not challenge the trial court’s application of the nonseverability provision. We conclude that [defendant]’s motion to compel arbitration was properly denied.”