Iskanian Applies Only to the Man's Bread

Esparza v. KS Indus., LP, No. F072597 (D5 Aug. 2, 2017)

In the Iskanian case, the California Supreme Court held that claims brought under the Labor Code Private Attorney General Act are not arbitrable because, although they are litigated by private parties, the relief sought in them—civil penalties—belongs to the state, which never agreed to arbitrate. That includes PAGA “representative actions,” where an employee can seek penalties arising from her employer’s violations involving other employees. Given the US Supreme Court’s upholding of arbitration clause class action waivers in the Concepcion case, Iskanian has had the effect of pushing a lot of formerly class action employment litigation into the PAGA realm. 

But, as the Court here holds, PAGA relief is limited to the kinds of civil penalties that could be obtained by California’s labor law enforcement agencies. It does not include unpaid wages or other damages—even statutory damages—that could be recovered directly by an employee in a non-PAGA action.

Plaintiff here brings a claim under PAGA for enforcement of Labor Code § 558, which provides for liquidated-per-pay-period penalties, in addition to compensation for underpaid wages, the latter of which are to be “paid to the affected employee.” Thus, although § 558 could be read to include the underpaid wages under the rubric of a “civil penalty,” because they aren’t penalties paid to the state government, they aren’t the kinds of civil penalties that Iskanian exempted from arbitration. 

So to the extent the Plaintiff seeks both penalties and unpaid wages, the wage claims are arbitrable and the court needs to decide whether to stay the PAGA case pending arbitration. On the other hand, Plaintiff could limit himself to the PAGA recoverable claims, in which case there’s no need for an arbitration. But it’s not entirely clear which course Plaintiff actually prefers, so the trial court needs to figure that out on remand.

Reversed and remanded.