As the number of PAGA (Private Attorneys General Act) cases continue to rise amid the COVID-19 pandemic, a state appellate court has ruled that an employee cannot be compelled to arbitrate a PAGA claim on the basis of a pre-dispute arbitration agreement.
The ruling is a disappointment though not necessarily a surprise, Tom Manzo, founder and president of the California Business and Industrial Alliance (CABIA), told the Northern California Record.
“It’s still very concerning and disheartening, because people are looking for some kind of change and relief from these claims,” Manzo said. “It’s very expensive to undertake these kinds of lawsuits and to stand up for your business.”
PAGA allows suits against employers on behalf of workers for alleged infractions of California labor laws, which has led to criticism the statute is overly incentivizing for trial attorneys. When the plaintiffs prevail, the employee gets to keep a quarter of the award and three-quarters goes to the state’s Labor and Workforce Development Agency. But the fees awarded to the plaintiff’s lawyers are calculated based on the full award amount.
In the California Fourth Appellate Court opinion issued July 20 in Collie v. The Icee Co., the three-judge panel said that because PAGA is a dispute that also involves the state, as well as the employee, it can’t be compelled to arbitration.
The judges said their decision follows previous state appeals court rulings in Iskanian v. CLS Transportation Los Angeles (2014) and Betancourt v. Prudential Overall Supply (2017). And they found a 2018 U.S. Supreme Court ruling, Epic Systems Corp. v. Lewis, does not change the reasoning of those appellate cases.
“Epic, therefore, does not undermine Iskanian’s or Betancourt’s characterization of PAGA claims as law enforcement actions in which plaintiffs step into the shoes of the state,” Justice Frank J. Menetrez wrote in the ruling.
CABIA has called on Gov. Gavin Newsom to suspend PAGA claims amid the COVID-19 pandemic, but it hasn’t happened. Meanwhile the number of cases has grown.
The biggest concern with PAGA is the issue of separation of powers, Manzo said.
“It allows private citizens to be deputized as acting attorneys general,” Manzo said. “And it’s led to private attorneys gaming the system. Last week, they were averaging 30 PAGA notices a day going out, that’s a big number. The March of Dimes is on the list. They are suing anybody and everybody at the worst possible time there could be.”
Manzo noted that PAGA has been interpreted in different ways by different judges.
“Until Iksanian really gets challenged, the path is going to continue down this particular road,” Manzo said.