Employee Could Not Be Forced to Arbitrate PAGA Claims

California court rejects employer’s assertion that action was really wage and hour lawsuit

By Joanne Deschenaux, J.D. Mar 20, 2017

An employee who brought a Private Attorneys General Act (PAGA) lawsuit alleging violations of California wage and hour laws could not be forced to arbitrate his claims, the California Court of Appeal ruled.  

Although the employee had signed an agreement to arbitrate all disputes related to his employment, it is settled law in California that an employer can't rely on such an agreement to force arbitration in a PAGA case, the court noted.  

Moreover, the employee's request for "further relief" in addition to civil penalties provided by PAGA did not change the PAGA suit into a standard wage and hour action, which would have been subject to arbitration, the court found.

Employee Suing on Behalf of State

PAGA authorizes employees, "acting as private attorneys general," to recover civil penalties for Labor Code violations. In a PAGA lawsuit, the employee is essentially suing on behalf of the state and, if successful, recovers only civil penalties, not the individual damages available in wage and hour lawsuits.

[SHRM members-only toolkit: Preventing Unlawful Workplace Retaliation in California]

Roberto Betancourt sued his employer, Prudential Overall Supply, under PAGA, claiming the company failed to pay employees overtime due them or to provide required meal and rest periods. Betancourt asked for the civil penalties available under PAGA but also asked for any "further relief" the court may "deem appropriate. "  

Prudential argued that all of Betancourt's claims related to employment and so were subject to arbitration under the agreement he had signed. Pointing to the additional remedies Betancourt sought, the company alleged that the lawsuit was a standard wage and hour case, not a PAGA suit, and that Betancourt was trying to evade arbitration by calling it a PAGA case. The trial court refused to order arbitration of the claims, and Prudential appealed.

In upholding the trial court's decision, the appellate court found that the lawsuit was a PAGA action. Betancourt sued as a representative of a group of employees, referred to the law relating to PAGA and requested civil penalties.

The appellate court also rejected Prudential's claim that the trial court should have ordered arbitration because Betancourt asked for remedies in addition to those provided by PAGA. The court said that if Prudential believed that the complaint included wage and hour claims in addition to the PAGA claims, it could have sought arbitration of the wage and hour claims. But, the court said, Prudential should have first asked the court to separate those claims from the PAGA claims. If the court agreed, the company then could have forced arbitration of the wage and hour claims.

Betancourt v. Prudential Overall Supply, Calif. Ct. App. No. E064326 (March 7, 2017).

Professional Pointer: Trying to compel arbitration of PAGA claims will likely be unsuccessful even if the employee has signed a contract agreeing to arbitrate employment-related disputes. However, claims for damages for wage and hour violations—as opposed to claims for civil damages available under PAGA–may be subject to mandatory arbitration.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.

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