Labor & Employment Law Daily Wrap Up, ARBITRATION—Cal. App.: PAGA representative action includes individual PAGA claim on plaintiff’s behalf, (Jan 6, 2025)

By Ronald Miller, J.D.

The statutory language unambiguously provides that any PAGA action includes an individual PAGA claim.

A “shopper” for an online ordering platform, who brought PAGA claims against her employer, was ordered to first arbitrate her individual PAGA claims, ruled a California Court of Appeals. Accordingly, an order of a trial court denying the employer’s motion to compel arbitration of the individual PAGA claim was reversed. Rather, the trial court was directed to issue a new order compelling the parties to arbitrate the plaintiff’s individual PAGA claim and staying litigation of her representative PAGA claim (Leeper v. Shipt, Inc., No. B339670 (Cal. App. Dec. 30, 2024)).

Shoppers. The employer is an online ordering platform whose members arrange for “[s]hoppers” to purchase and provide delivery of goods from local merchants. On March 19, 2019, the plaintiff entered into an independent contractor agreement with the employer to provide services as a shopper. The independent contractor agreement references and incorporates a separate arbitration agreement which the plaintiff and the employer also executed.

The arbitration agreement obligates the plaintiff and employer to “resolve[ ] through mandatory, binding arbitration” “any and all disputes, claims, or controversies of any kind and nature between [them].” The arbitration agreement also delegates to the arbitrator several threshold issues, including disputes about whether any claims are subject to arbitration and “claims... regarding the scope, interpretation, validity, and enforceability of any Independent Contractor Arbitration Agreement or this Arbitration Agreement.”

PAGA complaint. On March 14, 2024, the plaintiff filed a complaint against the employer styled as a “representative complaint for injunctive and declaratory relief, civil penalties, and other relief under [PAGA].” The complaint alleged that the employer misclassified shoppers as independent contractors in violation of multiple provisions of the California Labor Code. According to the plaintiff, she qualified as an “aggrieved employee” under PAGA.

The plaintiff alleged a single count for PAGA non-individual penalties. She alleged that she “[brought] this PAGA action on a representative, non-individual basis” and “in [her] representative capacity as an aggrieved employee on behalf of the state and all similarly aggrieved individuals. The plaintiff also asserted that because she alleged only non-individual PAGA claims on a representative basis, the employer could not compel them to arbitration.

Motion to compel arbitration. On May 14, 2024, the employer filed a motion to compel arbitration of the individual portion of the plaintiff’s PAGA action. In her opposition, the plaintiff argued she had not alleged any individual claims, and thus there was nothing to compel to arbitration. The trial court denied the motion on the basis that “[the] action [was] solely a representative PAGA suit without any individual causes of action.” This appeal ensued.

PAGA framework. PAGA authorizes “an aggrieved employee,” acting as a proxy or agent of the state Labor and Workforce Development Agency (LWDA), to bring a civil action against an employer “on behalf of himself or herself and other current or former employees” to recover civil penalties for Labor Code violations they have sustained. This definition of a PAGA action is contained in Section 2699, subdivision (a). Here, the appeals court was concerned with what a PAGA action entails as defined by Section 2699, subdivision (a).

All PAGA actions are inherently representative in that a PAGA plaintiff is always acting as a proxy for the LWDA and collecting civil penalties on the LWDA’s behalf. A PAGA plaintiff is also acting in a representative capacity by asserting a PAGA claim based on violations that employees other than the plaintiff have suffered.

Individual PAGA claim. Agreeing with the employer that the plaintiff’s PAGA action included an individual PAGA claim on the plaintiff’s behalf, the court determined that this was not a PAGA action brought in a purely representative capacity on behalf of other employees. In pertinent part, Section 2699, subdivision (a) describes a PAGA claim as “a civil action brought by an aggrieved employee on behalf of the employee and other current or former employees.” Thus, the statutory language unambiguously provides that any PAGA action includes an individual PAGA claim. The clause “on behalf of the employee and other current or former employees” means that the action described has both an individual claim component and a representative component.

The appeals court recognized that the existence of an individual PAGA claim in every PAGA action means this claim often may be separately compelled to arbitration where the FAA applies, which may trigger a stay of the litigation of the representative PAGA claim and even potentially affect the outcome of that litigation via issue preclusion. The plaintiff’s contention that this result contravenes public policy is not a ground for ignoring the unambiguous language of the PAGA statute, concluded the appeals court.

Standing decisions. Moreover, the appeals court determined that standing decisions cited by the plaintiff, namely the California Supreme Court decisions in Kim v.v. Reins International California, Inc. (2020) 9 Cal.5th 73, Adolphv. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, and Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.App.5th 533, did not support her interpretation of the statute. Those decisions did not speak to the issue presented in this case—that is, the definition of a PAGA claim—nor did any interpret the statutory language at issue here.

With regard to Kim, it was only after the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, that courts began discussing the possibility of splitting PAGA claims into individual and representative components that might be adjudicated in separate fora. Kim addressed only the question of standing, not the definition of a PAGA claim.

On the other hand, Adolph did discuss individual PAGA claims. The California Supreme Court concluded the plaintiff’s individual PAGA claim component could be adjudicated via arbitration without the plaintiff losing standing to pursue the remaining representative PAGA claim portion in court. The Adolph court did not, therefore, have occasion to consider whether the plaintiff could have, from the beginning of his lawsuit, alleged only a representative PAGA claim. Like Kim, Adolph speaks only to the requirements for PAGA standing based on Section 2699, subdivision (c)(1)—not what claims a PAGA action necessarily involves.

Balderas was another standing case, the holding of which addressed only PAGA standing issues and thus relied only on Section 2699, subdivision (c)(1)’s definition of “aggrieved employee.” Balderas did not discuss whether a plaintiff may carve out an individual PAGA claim from a PAGA action.

Individual claim to arbitration. Finally, the appeals court concluded that the trial court erred in not compelling the plaintiff’s individual PAGA claim to arbitration and staying the litigation. It also agreed with the employer that the trial court should have stayed the portion of the litigation remaining in court. However, the duration of the stay remains within the trial court’s discretion.

The case is No. B339670.

Judge: Rothschild, F.

Attorneys: Camille A. Olson (Seyfarth Shaw) for Shipt, Inc. Daniel M. Hutchinson (Lieff Cabraser Heimann & Bernstein) for Christina Leeper.

Companies: Shipt, Inc.; Target Corporation

Cases: WageHour ClassActions EmployeeStatus StateLawClaims Arbitration CoverageLiability CaliforniaNews