California court highlights difference between two types of PAGA claims

In the case of Galarsa v. Dolgen California, LLC, a woman sued her former employer for civil penalties under the Private Attorneys General Act of 2004 (PAGA) for violations of California’s Labor Code allegedly suffered by her or by other employees.

In March 2016, the plaintiff applied for employment as an hourly-paid assistant manager at Dolgen California, LLC – the defendant in the case and a wholly-owned subsidiary of Dollar General Corporation. She accessed the company’s express hiring system, electronically signed its arbitration agreement, and marked a box stating that she agreed to the agreement’s terms and understood that she would be bound by the terms.

The arbitration agreement provided that its procedures would be the exclusive means of resolving certain claims, including alleged violations of wage and hour laws and other state or federal laws, relating to or arising from the employment. The agreement had a severability clause.

The plaintiff started working for the company in April 2016. It terminated her employment in January 2017. This prompted her to file a lawsuit seeking civil penalties under PAGA. She specifically alleged violations of sections 201, 202, 203, 204, 226(a), 226.7, 510, 512, 1174(d), 1194, 1197, 1197.1, and 1198 of the Labor Code.

The company filed a motion to compel arbitration and to put the legal proceedings on pause until the completion of the arbitration. It argued that the plaintiff should individually arbitrate the alleged wage and hour violations involving herself.

The trial court denied the company’s motion. It said that an employee could not waive her right to bring a PAGA representative claim. The appellate court affirmed the trial court’s decision. California’s Supreme Court denied the company’s petition seeking review.

The U.S. Supreme Court granted the company’s petition and returned the case to the appellate court so that it could consider the case in view of the recent ruling in Viking River Cruises, Inc. v. Moriana (2022).

The California Court of Appeal for the Fifth District found that neither the Viking River case nor the Federal Arbitration Act invalidated the rule of California law, which stated that arbitration provisions attempting to waive an employee’s right to pursue representative claims under the PAGA would be unenforceable.

The company’s arbitration agreement had a waiver provision like this. The appellate court said that, while this waiver provision was unenforceable, the arbitration agreement had a severability clause which would allow the court to strike the unenforceable provision from the agreement.

Next, the appellate court distinguished between two types of claims. The first type involved claims seeking to recover a civil penalty imposed because of Labor Code violations suffered by the plaintiff. The second type covered claims relating to violations against employees other than the plaintiff.

For the first type of claims, they should be sent to arbitration in line with the principles of the Viking River decision and the Federal Arbitration Act, the appellate court said. However, the appellate court determined that the plaintiff could pursue the second type of claims in court.