©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 93 whether to enforce arbitration agreements by which the parties waive the right to participate in representative actions, such as PAGA actions.112 The California Supreme Court finally addressed that issue in 2014, in Iskanian v. CLS Transportation Los Angeles, LLC. Iskanian acknowledged that the FAA preempts California’s policy against class action waivers in arbitration agreements,113 but also held, against the weight of federal authority, that representative actions are not subject to mandatory arbitration.114 The Court of Appeal then expanded on Iskanian to conclude that predispute waivers of the judicial forum in a PAGA claim are unenforceable, and that the predispute/postdispute boundary is not crossed until the pertinent employee is authorized to commence a PAGA action as an agent of the state: “Only after employees have satisfied the statutory requirements for commencing a PAGA action are they in a position ‘to determine what trade-offs between arbitral efficiency and formal procedural protections best safeguard their statutory rights.’”115 Employers sought to revisit PAGA’s immunity from arbitration agreements after a 2018 U.S. Supreme Court ruling that arbitration agreements requiring individual arbitration are enforceable under the FAA, regardless of employee rights to concerted activity under the NLRA.116 But in 2019 the Court of Appeal reaffirmed that PAGA representative action waivers remain unenforceable under California law and that PAGA representative actions may not be compelled to arbitration without the state’s consent.117 A 2020 case upheld an employee’s right to seek injunctive relief against arbitration of a PAGA claim. The employee had brought a PAGA suit for violation of wage and hour laws. When the employer moved to stay proceedings pending arbitration under the parties’ employment contract, the employee sought a preliminary injunction against the arbitration. The trial court issued the injunction and denied the employer’s stay request. The Court of Appeal affirmed, holding that the trial court properly considered (1) the party’s likelihood of prevailing on the merits and (2) the relative interim harm the parties would suffer from the issuance or nonissuance of an injunction. Both factors seemed to favor the injunction: because the PAGA claim was representative, not individual, the plaintiff could not be compelled to submit any portion of it to arbitration, including whether he was an “aggrieved employee,” and so arbitration of a nonarbitrable claim would be futile. And the employee’s harm from suffering arbitration would outweigh the employer’s harm from an injunction against arbitration.118 Another 2020 case similarly held that predispute waivers of PAGA claims are unenforceable. The Court of Appeal held that the plaintiffs’ arbitration agreements were unenforceable as to their PAGA claims, which they brought on behalf of the LWDA—the real party in interest despite it not being named as such. Here, although the plaintiffs were acting as agents of the LWDA when they sued, they were not acting as LWDA agents when they signed their arbitration agreements. Consequently, the agreements were not entered into on behalf of the LWDA and thus could not be enforced against the LWDA. Because there was no arbitration agreement between the employer and the LWDA, the trial court properly denied the employer’s motion to compel arbitration.119 Two 2020 Court of Appeal decisions rejected employer arguments that the California Supreme Court’s 2014 Iskanian decision—holding that employee cannot be compelled to arbitrate PAGA claims on the basis of predispute arbitration agreements—did not survive the U.S. Supreme Court’s 2018 decision in Epic Systems Corp. v. Lewis upholding an arbitration agreement with a class action waiver. In the first case, the Court of Appeal noted that Epic does not address the PAGA plaintiff’s unique status as “the proxy or agent” of the state in enforcing state labor laws on behalf of state law enforcement agencies. Epic thus does not undermine Iskanian’s characterization of PAGA claims as law enforcement actions in which plaintiffs step into the shoes of the state. Moreover, while Epic reconfirmed the FAA’s breadth, the FAA allows courts to refuse to enforce arbitration agreements on grounds applicable to any contract, and refusing to enforce a PAGA waiver in an arbitration agreement would be for a reason that would apply to any contract: the LWDA is not a party to the agreement, and thus cannot be bound by the employee’s pre-dispute agreement to arbitrate.120
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