Back in 2014, the California Supreme Court ruled in Iskanian v. CLS Transportation Los Angeles that an individual employee who has signed a mandatory arbitration agreement may be compelled to arbitrate his “individual damages claims.” However, if that employee joins a representative PAGA claim to his other damages claims, that PAGA claim cannot be sent to arbitration because the real party in interest in that PAGA claim — the State of California — has never consented to arbitration.
But what happens if the employee who has signed a mandatory arbitration agreement brings only a representative PAGA claim — with no other claims for individual damages? May the Court “split” that PAGA claim and order the employee to arbitration to recover his underpaid wages (since he has agreed to it) but then retain jurisdiction to separately award the additional statutory penalties prescribed by PAGA (since Iskanian says that is the Court’s role exclusively)?
According to a recent California Court of Appeal case, the answer is “No.”
In Zakaryan v. The Men’s Wearhouse, the Court reached this decision by focusing on California’s “primary rights doctrine.” According to the Court, splitting a single PAGA claim into two separate actions would violate California’s primary rights doctrine because it would impermissibly divide a single primary right. In other words, because an employee who brings a PAGA claim is vindicating only one injury — specifically, the injury to the public that the state’s Labor Commissioner’s office was created to safeguard — that employee is enforcing a single “primary right.” And, according to the primary rights doctrine, a single primary right is never subject to being split or divided in any way.
In addition, the Court also explained how splitting a single PAGA claim into two separation actions would “run afoul of” both California labor law and arbitration law. The Court emphasized that our California Supreme Court held in Iskanian that an employee always has two choices in California: if he’s suffered a wage-and-hour violation, he can bring a claim for underpaid wages for himself, or he can bring an individual PAGA claim on behalf of the State of California. As the Court explained:
“If he chooses the latter, the employee gets to recover underpaid wages and per-pay period penalties for himself and his fellow employees in court (rather than arbitration), but he is required to give 75 percent of the total recovery to the agency and to split the remaining 25 percent with his fellow employees. Each has its pros and cons, but the choice of which to pursue is ultimately the employee’s call.”
If the employee decided to bring a single PAGA claim but then was required to “split” that single claim so that part proceeded in arbitration and the other part in litigation, that would effective “rewrite” his lawsuit into two separate claims. This, the Court said, would make the employee’s choice “meaningless.”
As a result, the Court affirmed the lower court’s denial of the employer’s petition to compel arbitration. The employee was therefore free to proceed with his single PAGA claim in court regardless of the fact that he had previously signed two separate mandatory arbitration agreements.
You can read the Court’s opinion in Zakaryan v. The Men’s Wearhouse here.
