Latest decision on arbitration of PAGA claims offers mixed bag

Many employers elect to use arbitration agreements with their employees and contractors, and recent cases have supported the enforceability of such agreements. Many individuals who have entered into arbitration agreements nonetheless file lawsuits in court, and it then falls to the company to file a request to compel enforcement of the arbitration agreement. In a recent case, Uber achieved a surprising result when it tried to enforce its arbitration agreement.

PAGA refresher

In many employment-related actions, the former employee files a claim under the California Private Attorneys General Act (PAGA). This statute not only empowers an “aggrieved employee” to file claims under PAGA for wage and hour violations they suffered but also authorizes them to file such claims on behalf of other “aggrieved employees” who have also allegedly suffered wage and hour violations.

A PAGA claim is a “representative action,” because even when filed by a single employee on their own behalf, they are bringing the action as a representative of the state of California, and 75% of any judgment or settlement recovered is paid to the state. Additionally, if the PAGA claim is filed on behalf of other aggrieved employees, the filing employee is acting as the representative of both the state and the other aggrieved employees.