PAGA Claims Excluded From Arbitration, Says Sixth District

Yesterday, the Sixth District reversed an order granting arbitration of an employee's PAGA claims.  Brown v. Superior Court (Morgan Tire & Auto, LLC), No. H037271, __ Cal. App. 4th __ (6th Dist. June 4, 2013).  This is a hotly contested issue that is currently before the California Supreme Court in Iskanian v. CLS Transportation of Los Angeles.  In Brown, the Sixth District sided with employees with respect to the arbitrability of PAGA claims, holding that “When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right.”  

The question presented in this case is whether the Federal Arbitration Act (9 U.S.C. §§ 1-16) (FAA) permits arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA). (Lab. Code, § 2698 et seq.) We conclude that the FAA does not demand enforcement of such an agreement. A plaintiff suing for PAGA civil penalties is suing as a proxy for the State. A PAGA claim is necessarily a representative action intended to advance a predominately public purpose. When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion) does not require otherwise.

Slip Op. at 1-2.