Employees cannot avoid arbitration by reframing PAGA claims

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Contributors

California’s Second District Court of Appeal reaffirmed that employees cannot bypass arbitration by filing only “representative” PAGA claims.

In Leeper v. Shipt, Inc. (2024), an employee attempted to disclaim her individual PAGA claim to avoid arbitration. The court rejected this tactic, ruling that every PAGA claim includes both individual and representative components, even if an employee tries to exclude their own claim. Since the employer had a valid arbitration agreement covering individual PAGA claims, the court compelled arbitration.

Key takeaways for employers

  • Well-drafted arbitration agreements can require employees to arbitrate individual PAGA claims.
  • If arbitration is compelled, the broader PAGA lawsuit is put on hold until the individual claim is resolved.
  • The June 19, 2024, PAGA reform now requires class representatives to have personally suffered the alleged violations, potentially deterring “headless” PAGA claims.
  • More appellate cases are pending, and the California Supreme Court may ultimately clarify issues present in Balderas and Leeper. In particular the Second Appellate Districts and the Fourth Appellate Districts are set to rule on the issues decided in Leeper and Balderas in Sood Enterprises, Inc. v. Medina, 2024 WL 4286386, Cal. App. 2 Dist., No. B333390, Garcia Omni Hotels Management Corporation, 2024 WL 3843700, Cal. App. 4 Dist., No. D084151, and Barnett v. First American Home Warranty Corporation, 2024 WL 4820844, Cal. App. 4 Dist., No. D084315, this year. We will continue to watch the developments in this area to see if greater clarity is provided from the Appellate or Supreme Court.

HR professionals should review arbitration agreements with knowledgeable counsel to ensure they align with these evolving legal developments.