Takeaway: Employees who sued their former employers—asserting individual claims under the California Labor Code as well as claims under California's Private Attorneys General Act (PAGA)—but later dismissed their individual claims could not be compelled to arbitrate those claims. The employers were seeking to use arbitration not as a forum for neutral dispute resolution but as a shield against liability under PAGA.
Four workers who had signed arbitration agreements with their two former employers sued those employers, asserting individual claims under the California Labor Code as well as claims under California's Private Attorneys General Act (PAGA). The employees later dismissed the individual claims, leaving only the PAGA claims before the court. The employees could not be forced to arbitrate those dismissed individual claims, a California appellate court ruled, affirming a lower court's order denying the employers' motion to compel arbitration.
PAGA was enacted in 2003 to authorize private parties to sue under the California Labor Code for the civil penalties previously only recoverable by the state. An employee bringing a representative action under PAGA does so as an agent of the state's labor law enforcement agencies, not other employees.
The employers agreed that the employees' PAGA claims could not be forced into arbitration. They argued, however, that arbitration was still required to resolve the arbitrable individual claims the employees had raised in their...
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