When litigating wage and hour class and representative actions in California there is a tension between an employee’s (and the employee’s attorneys’) wish to sue on behalf of all employees (a class or representative action) and an employer’s wish to resolve disputes with the specific employee who alleges to have been aggrieved (an individual action). There are various tools used by either side in this battle, including California Code of Civil Procedure section 382 (California’s class action requirements), California’s Private Attorneys General Act (“PAGA”) and the Federal Arbitration Act (“FAA”).
Employers may try to resolve employee wage disputes on an individualized basis by entering into pre-dispute arbitration agreements with employees that waive the right to assert claims on behalf of other similarly situated employees. When done properly, courts uphold the validity of these waivers (known as class action waivers). In contrast, the California Supreme Court has held that PAGA representative actions can’t be waived or compelled to arbitration by employee agreement because the real party in interest is the State of California (specifically, California’s Labor Workforce and Development Agency).
As a result of these dynamics, issues of “standing” and the concept of an individual PAGA claim versus a group/representative PAGA claim became important. Employers press to compel the “individual” portion of PAGA claims into private arbitration and to stay the representative portion of the PAGA claim, which remain in court pending resolution of the individual arbitration proceeding. If in arbitration it is determined that the employee has no valid claims and is therefore not a proper representative to bring the action on behalf of other employees, employers should argue for a dismissal of the court action.
To avoid a stay and potential dismissal of the court action, employees’ counsel began filing PAGA complaints purporting to be “representative-only.” On December 30, 2024, however, the California Court of Appeal, Second Appellate District, issued an opinion undermining this strategy. In Leeper v. Shipt, Inc., the plaintiff filed a lawsuit alleging that she and others were misclassified as independent contractors by defendant and asserted a single cause of action under PAGA on a “non-individual basis,” seeking only “non-individual civil penalties” and “non-individual injunctive and declaratory relief.” (Leeper v. Shipt, Inc. (2024) 107 Cal. App. 5th 1001.) Because plaintiff signed a valid arbitration agreement as to her individual claims, defendant moved to stay the court action and compel arbitration of her individual claims. In response, plaintiff asserted she was not pursuing her individual claims and could therefore not be compelled to arbitration. The trial court agreed with plaintiff.
The appellate court disagreed. It stated that the issue of whether or not an employee can file a representative-only claim in a PAGA lawsuit hinges on what constitutes a “PAGA claim.” The first step in the analysis is to look at the plain language of the statute to ascertain legislative intent. Labor Code section 2699(a) defines a PAGA claim as “a civil action brought by an aggrieved employee on behalf of the employee and other current or former employees.” (Emphasis added.) The Leeper court focused on the choice of the legislature to use the word “and” (that is, the employee and others) as opposed to “or” (the employee or others). The court also noted that the legislature originally drafted the statute using the word “or” but later changed it to “and” in the final statutory language. As a result, the court reasoned that this statutory plain language means that the legislature intended to define a PAGA claim as one that encompassed both an individual action and a representative action, and all PAGA claims include an individual element even if not expressly pled by a plaintiff employee. Therefore, the court ruled that plaintiff would have to resolve her individual claim in arbitration before she could proceed in court with a representative PAGA claim on behalf of others.
Coupling this court decision with recent amendments to PAGA may provide a promising strategy for employers to avoid frivolous representative actions. First, a PAGA action can only be brought by an “aggrieved employee.” As amended, PAGA defines an “aggrieved employee” as “any person who was employed by the alleged violator and personally suffered each of the violations alleged ….” (Cal. Lab. Code section 2699(c)(1).) (Emphasis added.) In other words, if an employee does not suffer a violation of a particular Labor Code provision, he or she does not have standing to represent other employees for violations of that same provision. As such, if the employer can compel the employee to litigate his or her individual claims first, and prove a lack of merit, the employee will not have standing to proceed in court as a representative for violations not suffered. That said, it remains to be seen whether a court will dismiss the representative PAGA claim when the representative that brought it has proven inadequate or, as sometimes seen in putative class actions, the court will allow counsel for the employee to find a new representative for the non-individual claims.
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