California Supreme Court affirms employee's right to sue under PAGA

In Iskanian v. CLS Transportation Los Angeles, LLC (2014), the California Supreme Court said that an employee’s right to sue under the Private Attorneys General Act (PAGA) was unwaivable and that the rule against such waivers did not frustrate the Federal Arbitration Act (FAA)’s objectives.

In Wing v. Chico Healthcare & Wellness Centre, Chico Healthcare & Wellness Centre, LP hired a receptionist at a skilled nursing facility. She agreed, as an employment condition, to be bound by the company’s alternative dispute resolution (ADR) policy.

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The ADR policy required employees and the employer to exclusively resolve covered disputes between them via final and binding arbitration and included a waiver of class actions or of actions as a private attorney general or as a representative of others.

In June 2018, the employee provided notice to the Labor and Workforce Development Agency, as required by the law, of alleged Labor Code violations by her employer. In August 2018, she filed a complaint. She made class claims and PAGA representative claims for wage, overtime, meal break, and other Labor Code violations.

The employer, citing the ADR policy, sought arbitration of the employee’s individual claims and asked the court to strike the class claims and to stay the PAGA claims pending the arbitration’s outcome. The employee refused and instead amended her complaint to delete the class claims.

Following an unsuccessful mediation, the employer brought a motion to compel arbitration of the employee’s PAGA claims. The trial court denied the employer’s motion. It said that it was bound by Iskanian and by the subsequent cases agreeing with that ruling.

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The employer’s appeal asked the appellate court to reconsider Iskanian in light of two U.S. Supreme Court cases — Epic Systems Corp. v. Lewis (2018) and Kindred Nursing Centers Ltd. Partnership v. Clark (2017) — that impliedly overruled Iskanian. The employer acknowledged that these decisions did not directly tackle PAGA.

The California Court of Appeal for the Second District affirmed the trial court’s denial of the employer’s motion to compel arbitration.

Epic Systems stated that, under the FAA, courts should enforce waivers of class or collective actions in employment agreements that required individualized arbitration.

As for Kindred Nursing, the case addressed the Kentucky Supreme Court’s clear-statement rule, which provided that a power of attorney could not authorize a legal representative to enter into an arbitration agreement if they lacked specific authority to waive their principal’s constitutional right to court access and to jury trials.

According to the appellate court, the decisions of Epic Systems and Kindred Nursing did not do the following:

• undermine the force of Iskanian’s ruling;
• decide the same question as in Iskanian;
• involve a private action between private parties asserting private rights;
• involve an action between an employer and a representative seeking to recover civil penalties on the state’s behalf to benefit the general public;
• address whether a worker could waive the right to bring a representative action on behalf of a state government.

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