The GigReporter

The strategy used by litigants to get around arbitration under PAGA may come to an end. California’s appellate courts issued conflicting decisions last year about aggrieved employees who bring Private Attorney General Act (‘PAGA” or the “Act”) as solely representative actions, without individual claims, in a blatant move to avoid binding arbitration. These decisions set up the state’s Supreme Court to make a more definitive settlement on the use of this strategy.

PAGA authorizes “aggrieved employees” to bring lawsuits against employers for violations of the California Labor Code, standing in the shoes of the state government, including their own individual claims and claims on behalf of other employees (“representative” claims). In deciding that individual claims were subject to arbitration under the Federal Arbitration Act, the United States Supreme Court’s majority opinion interpreted the Act so that an aggrieved employee whose individual claims were stayed during arbitration lost standing to maintain representative claims; however, Justice Sotomayor’s concurring opinion noted this was a state law issue on which the high court’s interpretation was not binding. See Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022).

The California Supreme Court took up Justice Sotomayor’s invitation a year later in Adolph v. Uber Techs., Inc., (2023) 14 Cal.5th 1104, holding that a plaintiff whose individual claims had been ordered into arbitration retained standing to pursue representative claims. Then, Balderas v. Fresh Start Harvesting, Inc. (App. 2d Dist. 2024) 101 Cal.App.5th 533, decided in March of last year by the Second Appellate District, Division Six, addressed a genuinely “headless” action, one where the plaintiff, while claiming to be an aggrieved employee, brought only representative claims and no individual claims. The trial court dismissed the case, saying the plaintiff lacked standing because of the lack of individual claims, and the Court of Appeals, relying on Adolph, reversed and allowed the action to proceed. Finally, the Second Appellate District, Division One decided Leeper v. Shipt, Inc., No. B339670 (Cal. App. 2d Dist. Dec. 30, 2024), where the court held that even a putatively “headless” action must necessarily include an individual claim, dismissed inconsistent language from Balderas as mere dicta, and ordered the trial court to compel arbitration of the plaintiff’s individual claim while staying the representative claims.

The result in Leeper is more favorable to businesses seeking to avoid PAGA litigation through arbitration agreements, but such a blatant disagreement among the Courts of Appeal will be hard for the Supreme Court of California to ignore, especially after taking on PAGA arbitrability questions so frequently in the recent past. The court is likely to take a case to concretely resolve these questions around “headless” PAGA actions soon.