Labor & Employment Law Blog

Notably, one member of the three justice panel that decided the case dissented from that part of the decision holding that that waiver of the right to file a representative action under PAGA is unenforceable and expressed the view that "[t]he preemptive effect of the Federal Arbitration Act (FAA) requires enforcement of the PAGA waiver in the employment arbitration agreement [at issue in the case] under the holding of AT&T v. Concepcion." That dissenting opinion suggests reasons why a higher court might later disagree with the Court of Appeal and hold that PAGA waivers are enforceable under the FAA despite contrary state law.

Today's decision if left undisturbed by higher courts is a significant setback for California employers. Plaintiffs bringing class action wage and hour lawsuits now routinely include allegations that their claims fall under PAGA, which provides for awards of very sizable penalties for violations of many provisions of the California Labor Code when aggregated to account for hundreds or even thousands of class members. PAGA provides for penalties of $100 per employee per pay period for each initial violation and of $200 per employee per pay period for each subsequent violation. Further, as we previously reported here and here, California courts hold that PAGA penalties apply, also, to violations of Industrial Welfare Commission Wage Orders.  

Given the significance of the issues involved in today's decision, we anticipate further developments, regarding those issues, which we will report on here.  

In the meantime, in light of today's decision, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.