LOS ANGELES (Legal Newsline) – Plaintiffs using California’s Private Attorneys General Act to sue their employers can’t be sent to arbitration to decide if the case will go to arbitration, a California appeals court recently ruled.
On March 1, the Second Appellate District ruled against Zum Services, which is accused of misclassifying the plaintiffs and others as independent contractors. The company, a transportation service for children, tried to invoke an arbitration clause in their employment agreements, but the appeals court overturned a trial court ruling for Zum.
Letting an arbitrator decide whether the plaintiffs are “aggrieved employees” entitled to make PAGA claims goes against the purpose of the PAGA, the court ruled.
Because PAGA claims can’t be sent to arbitration, even issues of whether the plaintiffs are entitled to bring PAGA claims can’t either, the court found after Zum argued the actual merits of the case weren’t going to an arbitrator.
“Characterizing the process as resolving only an ‘arbitrability,’ ‘delegatable’ or ‘gateway’ issue, or the adjudication of an ‘antecedent’ fact, does not extinguish the risk to the state that it is an arbitrator, not a court, who nullifies the state’s PAGA claim,” Justice Laurence Rubin wrote.
The arbitration clause said both the employee and Zum waived rights to a jury trial and that any dispute will be decided by arbitration in San Mateo County. Employees also waive their rights to bring a class action.
But PAGA claims must be heard in court, judges around the state have found. The State has an interest in these cases – 75% of civil penalties that are recovered goes to the Labor and Workforce Development Agency and the rest goes to “aggrieved employees.”
Zum tried to argue that a California Supreme Court decision known as Iskanian should be torn down because of recent U.S. Supreme Court guidance on arbitration. Iskanian said a PAGA claim lies completely outside of the Federal Arbitration Act’s coverage because it is more than a dispute between an employer and an employee.
The SCOTUS cases to which Zum pointed didn’t apply, the Second District ruled.