Metropolitan News-Enterprise


Thursday, November 17, 2016


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C.A. Rejects Bid to Force Arbitration of Labor Code PAGA Claim


By a MetNews Staff Writer


An employee cannot be forced, on the basis of a pre-dispute agreement, to arbitrate any part of a claim brought under the Labor Code Private Attorney Generals Act, including the worker’s individual claim, the First District Court of Appeal ruled yesterday.

Div. Five rejected arguments by Bloomingdale’s, Inc., which contended that Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, which precludes enforcement of an arbitration agreement with respect to a representative claim under PAGA, was wrongly decided, or in the alternative, that Iskanian does not apply to the plaintiff’s individual component of the PAGA claim.

PAGA allows an employee to bring a qui tam action, suing his or her employer in order to collect penalties for violations of certain Labor Code provisions if the Division of Labor Standards Enforcement does not. The statute allows the employee to keep 25 percent of the penalties collected.

The action against Bloomingdale’s was brought by Bernadette Tanguillig, who sued in 2014 claiming that the company violated the code by failing to provide paid rest periods to commissioned employees, pay minimum wage for non-commission producing activities, provide complete and accurate wage statements, and pay wages on time.

The company moved to compel arbitration on the basis of the plaintiff’s agreement to submit “all employment-related legal disputes” to a four-step dispute resolution process, culminating in binding arbitration. The agreement prohibited any “class or collective action” or consolidation of multiple employees’ claims into a single proceeding.

In support of its motion, it argued that even if Iskanian was correctly decided, it was distinguishable because its employee had the ability to opt out of the arbitration process. The plaintiff responded that she asserted no individual claims, that PAGA claims cannot be waived in advance of any dispute, that the opt-out provision did not render Iskanian inapplicable, and that the waiver of representative claims was unconscionable.

San Francisco Superior Court Judge Ernest H. Goldsmith denied the motion to compel.

On appeal, Bloomingdale’s dropped its reliance on the opt-out provision, contending only that Iskanian was wrongly decided or that it did not apply to the individual element of the plaintiff’s claim. Justice Terence Bruiniers, writing for the panel, rejected both arguments.

Because Iskanian is a state Supreme Court decision, Bruiniers wrote, the Court of Appeal must follow it, and must thus reject the argument that the Federal Arbitration Act preempts California law barring compelled waivers of PAGA actions. He also rejected the argument that DIRECTV, Inc. v. Imburgia (2015) 136 S.Ct. 463, which held that California customers of DirecTV are bound by contractual waivers of the right to bring class actions, either in court or in arbitration, implicitly overrules Iskanian.

Under the FAA, the high court held, the waivers are enforceable even if California law in effect when the contracts were signed provided otherwise.

Bruiniers said DIRECTV decided a narrow issue that has no application to Tanguillig’s dispute with Bloomingdale’s. He also noted that the Ninth U.S. Circuit Court of Appeals, in the recent case of Mohamed v. Uber Technologies, Inc. (2016) 836 F.3d 1102, found a waiver of PAGA claims in Uber’s contracts with drivers to be unenforceable under Iskanian, even though the arbitration agreements were otherwise held valid.

The case is Tanguillig v. Bloomingdale’s, Inc., A145284.


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