Can't Waive the PAGA Till You're a PAG

Julian v. Glenair, Inc., No. B277064 (D2d4 Dec. 13, 2017)

By now, it’s well-settled that an employee’s claims under the Labor Code Private Attorney General Act, or PAGA, aren’t arbitrable, even if the employee’s contract says they are. But the Supreme Court decision that set that rule—Iskanian—had some dicta suggesting that its rationale did not apply to post-dispute agreements to arbitrate. The theory is, basically, that a PAGA claim belongs to the state, so the employee can’t agree to arbitrate it in an employment agreement. But once the employee is litigating on the state’s behalf she’s free to make any tactical decisions related to the litigation she deems advantageous, which includes the right, post dispute, to agree to send a case to arbitration.

The issue in this appeal is whether the pertinent agreement is a pre- or post- dispute agreement to arbitrate. It’s complicated a little by the procedural posture of the case. While the plaintiff was still employed with defendant, there was an existing class action. Defendant distributed a negative option opt-out agreement to its employees, which waived the right to bring representative actions. Plaintiff didn’t opt out. Then she got fired. Then the existing complaint was amended to bring a PAGA claim with her as plaintiff.

Defendant says that since the case was pending at the time Plaintiff failed to opt out, she agreed to a post-dispute waiver permitted by Iskanian. But the Court of Appeal doesn’t agree. It reasons that an employee can’t make an agreement to arbitrate that binds the state—the true owner of a PAGA claim—until she’s fulfilled the conditions in the Labor Code to bring a PAGA claim. Those include giving notice to the Labor and Workforce Development Agency and having the LWDA decline to bring its own case. Until that point the state—though the LWDA—controls the claim, so an individual employee can’t bargain it away. That’s the case even when some other employee has a related claim pending in ongoing suit at the time of an employer/employee agreement.

Affirmed.