March 8, 2021

Contreras v. Superior Court, B307025 (Mar. 1, 2021)

California’s Private Attorneys General Act (PAGA) permits an aggrieved employee to bring a representative action on behalf of current or former employees to recover civil penalties for wage-related violations of California’s Labor Code. Iskanian v. Transportation Los Angeles LLC (2014) 59 Cal.4th 348 held that a waiver of PAGA representative actions in an arbitration agreement cannot be enforced under California law, and that the Federal Arbitration Act did not preempt this prohibition.

In Contreras, plaintiffs brought a representative PAGA claim on behalf of current and former employees, alleging that the defendant misclassified them as independent contractors. The defendant moved to compel the plaintiffs to individually arbitrate based on their own arbitration agreements. The plaintiffs opposed the motion based on the Iskanian rule against enforcement of PAGA representative action waivers. In reply, the defendant argued a clause in the arbitration agreement delegated to the arbitrator the authority to decide whether the plaintiffs were “aggrieved employees” entitled to raise the PAGA claim. The trial court granted the motion, relying on the general rule that an arbitrator should decide such issues of arbitrability if there is an enforceable delegation clause in the arbitration agreement.

The Court of Appeal vacated this ruling with directions for the trial court to deny the motion. The court concluded that a clause delegating the issue of arbitrability to the arbitrator could not be enforced because such delegation efforts impermissibly seek to split a single representative PAGA claim into individual arbitrable and representative nonarbitrable components, contrary to California law.