On December 30, 2024, in Leeper v. Shipt, Inc., the California Court of Appeal (Second District) ruled that all Private Attorneys General Act (PAGA) actions necessarily include an individual PAGA claim, which, in turn, can be subject to binding arbitration agreements. https://www4.courts.ca.gov/opinions/documents/B339670.PDF
Leeper involved independent contractor misclassification and attendant PAGA claims brought by a worker who entered into an independent contractor agreement that included a binding arbitration clause. Plaintiff specifically alleged that she was filing solely in a representative capacity on behalf of similarly aggrieved individuals. Defendant Shipt moved to compel arbitration. The trial court ruled in Plaintiff’s favor finding that she did not allege individual claims, only representative ones that are not subject to arbitration.
The Court of Appeal reversed the trial court’s decision finding that California Labor Code Section 2698(a) unambiguously provides that PAGA claims are necessarily brought by an aggrieved employee on behalf of themselves and other employees. Specifically, since the statutory language includes the conjunctive “and” rather than disjunctive “or” this means that any PAGA action includes both individual and representative claim components. Consequently, the Court compelled arbitration of plaintiff’s individual PAGA claim and stayed the representative claims filed in the trial court.
Following Leeper, in every PAGA action where there is an otherwise enforceable binding arbitration agreement, a plaintiff may be compelled to arbitrate his or her individual PAGA claim while any representative claim will be stayed in any pending court lawsuit. The Leeper holding thwarts a recent PAGA strategy where creative plaintiff attorneys have been attempting to disclaim individual claims to avoid arbitration.
This decision strengthens employers’ ability to enforce arbitration agreements in PAGA cases while clarifying the interplay between individual and representative claims under PAGA. However, there is contrary authority from other California Court of Appeal decisions. Given what some may perceive as a jurisdictional split, we will follow this issue closely including any potential appeal(s) to the California Supreme Court.
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Scherer Smith & Kenny LLP remains available to assist you with these and any other employment-related questions you may have. For additional information, please contact Denis Kenny at [email protected] or any other members of our team including Ryan Stahl at [email protected], John Lough at [email protected] or Jaclyn Tran at [email protected].
-Written by Denis Kenny