THE PAGA CASE AND THE ARBITRATION: BACKGROUND.
Whether it is nobler to bear the stones and arrows of outrageous fortune and thus represent the public good, or to submit to the charge of a leech that feeds on others, the lifeblood of California’s economy, that is the question. And it will be decided by an appellate court one day, but until then, we have defense attorneys, and not a few judges, who would transmute a pure “Private Attorney General Law” into some class action hybrid, with all its attendant obstacles. and traps for the Claimants.
“PAYS” in a nutshell is a set of California Labor Codes that throws the ball at private attorneys to do what the California legislature felt the state wage control agency couldn’t or wouldn’t do: hold employers accountable. for violations of the Labor Code. The statute has a built-in incentive for private attorneys to act as “attorneys general” to bring such lawsuits and recover attorneys’ fees for their efforts if they win. As part of the “deal”, the employees and the State shared the product of the recovery.
The procedural battle is now in the dark valley between a clearly PAGA-based legal action for a penalty that would normally be recovered by the State of California, and specific individual Labor Code claims that allow a direct cause of action without sharing the reward with the state. . The reasoning of the above courts is that an arbitration claim signed by an employee does not extend to a Labor Code sanction case recoverable only by the State of California prior to PAGA. California and the employee(s) are effectively 75% and 25% equity partners, respectively, in the case, and the employer cannot force the State of California into arbitration. But in regards to that overtime claim, or break violation, for example, the employee has a separate and direct right to recover those amounts as “wages” rather than penalties. Those claims may be subject to an arbitration agreement signed by the employee.
CALIFORNIA PAY CLAIMS ARE NOT SUBJECT TO THE “CLASS ACTION” WAIVER OR ARBITRATION.
Current California law states that a pre-dispute PAGA waiver is unenforceable even if there was an intent to waive. The waiver is simply unenforceable because it is contrary to the fundamental policy of PAGA’s statutes to rectify and remedy employer labor violations through sanctions statutes through State coercive action. Securitas Security Services USA, Inc.v. Superior Court (Edwards) 2015 Cal. App. LEXIS 190 (Cal. App. 4th Dist. Feb. 27, 2015). Because the arbitration waiver agreement had a clause preventing PAGA’s illegal waiver from being severed, the entire agreement was invalid because it was contrary to public order.
The situation arises when a Plaintiff’s attorney includes multiple causes of action in a first document filed with the court called a “Demand.” The Lawsuit alleges some violations that are unique because, in the past, those causes of action were for civil penalties that were recoverable only from the State of California, through the Department of Industrial Relations.
However, if the Complainant-employee meets certain conditions by notifying the Department, and the Department consents, the Complainant may proceed to collect legal penalties from the Respondent-Employer. But suppose the Plaintiff has brought other causes of action that employees have always been able to sue without Department approval, such as overtime or break violations, or perhaps actions for discrimination, whistleblower retaliation, or defamation.
Let’s assume that the Plaintiff has included such causes of action in his Lawsuit, along with the sanction-based causes of action, and further assume that when the Plaintiff began work, before any dispute arose, he or she signed an Agreement of arbitration that resolves all disputes. between employer and employee would be resolved through binding private arbitration. That is, there will be no jury, judge, or court of appeal. Instead, the parties hire a private company, known as an arbitration service, to resolve the dispute. The contract signed by the employee includes an onerous and sulky waiver: No class action lawsuits.
For the final link in the chain of assumptions: Suppose the Respondent persuades the Court that the Arbitration Agreement is enforceable and the Court orders the case to Arbitration, with one exception. The claims of legal sanction, by precedent case, are not subject to arbitration, and those that the Court separates from the Agreement, referring the remaining causes of action to Arbitration. These non-arbitrable causes of action for sanction are called “PAGA” claims. These claims generally involve many employees suing as a group, but for technical reasons, the group is not considered a “class” requiring a court order approving the class by “class certification.” This is important because PAGA claims can produce large verdicts in the millions of dollars.
PAY CASES STALLED BY ARBITRATION, ALTHOUGH THEY ARE NOT SUBJECT TO ARBITRATION.
The stage is set: do the courts order individual wage claims to arbitration while suspending the PAGA case, and thus “wait and see” if the employee has viable PAGA claims? Perhaps the PAGA representative will simply walk away if he or she gets your full recovery in arbitration or by settlement.
The Tribunal can suspend the PAGA case because it does not want parallel proceedings that will produce inconsistent results, and that may produce some collateral factual/issue impediment in the PAGA case. The trial court may take the position that it does not have jurisdiction over the Arbitration Agreement and the timing of that Arbitration because it is a matter of separate private agreement between the employer and the employee. The trial court may also expect the PAGA case to be resolved in the course of arbitration, even if that case is still within the Court’s jurisdiction.
The defense bar’s primary argument: appealing to the self-interest of overburdened courts dealing with the complexities of multi-party litigation and the self-interest of the PAGA representative. The first loophole in the defense argument: Trial courts, until relieved by appellate courts, must not sacrifice the purpose and direction of PAGA for the sake of administrative efficiency.
“Handing over” the case piecemeal, especially to a non-judicial official, is a solution, but also a miscarriage of justice. It’s a common military tactical offensive and now defense-driven: divide and rule, and attrition increases the cost of war, but of course, in the name of efficiency.
But “little by little” is one thing and case management is another. It is reasonable to expect a court to control its own procedures to ensure due process and contain the cost and complexity of litigation. It is not yet clear how much restraint and control there may be in PAGA cases, or what laws or case law will support “case management,” even to the potential point of denying the PAGA case moving forward. The classic Post-Brinker v. Restaurant Group’s situation is if break violations are so variable from employee to employee that class certification is not indicated. Could and should the same be said of a PAGA for sanctions case?
JUDICIAL RESPONSES TO COMBINED PAY AND NON-PAY CLAIMS
More trial courts will decide “which comes first”: arbitration of non-PAGA wage claims or PAGA’s case for civil trial? That question has a very practical meaning. If arbitration comes first, issues are explored by discovery that may well affect the trial court case. It would be the classic “the tail wagging the dog”. Logic would indicate that you put your time and energy into the larger issues, and that the small case of individual overtime will be included in an eventual settlement. Or that individual overtime claims be dismissed to allow for a pure PAY case. Of course, the simple solution, subject to the client’s consent, is to bring only the “pure PAGA” case and, where possible, choose only a “clean” PAGA case. That is, do not include minor or high-risk individual wage and discrimination claims. In addition, Private Attorneys General, ie Plaintiffs’ attorneys, should focus on those cases that have a high degree of overlap based on a company-wide breach. Such was, for example, the case of bright v. 99 cent stores only 189 Cal.App4th 1472 (2010) where the failure to provide stools to sit at retail employee pay stations was the result of a company policy that stools were impractical.
RESTART OF ENGINES PAY CLAIMS STOPPED
The courts will design their own case management rules that will be something less than strict class action certification procedures, but more than full freedom to litigate the matter as a single-party case. Experienced legal scholars already handle these types of “complex” cases, and are likely to use complex multi-party litigation guidelines to control the costs and scope of discovery, and to arrive at quick and efficient ways to resolve interim litigation logjams. . But I also predict that the California Supreme Court will resolve the finality of these disputes as “for the public good” and as if brought by the State’s elected Attorney General. The result will be unsatisfactory for the plaintiff or the defense bar, but will allow PAGA cases to be heard and concluded quickly without the impediment of arbitration or some variation of the class action certification procedures.
CONCLUSION
Greed, in Adam Smith’s paraphrased words, is what makes the world go round. The defense bar appears to disparage both the intelligence and foresight of the California legislature by asserting that this is not a “private attorney general” case, but rather a “Get Rich Act” by Plaintiffs’ attorneys. Well, fine, but that is certainly incidental to the real incentive of the PAGA statutes: an incentive for employers to change their operations to comply with the law with every news release of another verdict for employees. If employers want to close PAGA cases, let them comply with the law.