Win for employers: No PAGA standing without underlying labor code violations

Employment arbitration agreements may have the practical benefit of precluding collective, class, or representative wage and hour claims from proceeding in state or federal court in favor of only an individual claim in arbitration. In the case of Private Attorneys General Act (PAGA) actions in particular, California courts routinely enforce such agreements to compel an employee’s individual wage and hour claims to private arbitration, while staying (halting) the representative PAGA action pending the outcome of arbitration. If an employee succeeds in demonstrating a labor code violation by the employer in arbitration, they may continue to pursue the PAGA action on behalf other similarly aggrieved employees in court, having satisfied the standing requirements for PAGA. What happens if the employee fails to prove their underlying labor code claims in arbitration? Do they still have standing to pursue the representative PAGA claim in court? According to a recent decision by the court of appeal, the answer is no.

Decision is final