Labor & Employment Law Blog

Over the past few years we have seen the standards for enforceability of arbitration agreements in PAGA cases frequently change. Because of these changes, it is critical that employers review their arbitration agreement to ensure they are up to date.  Relying on an older and outdated arbitration agreement can potentially cause a lost opportunity to have employment-related claims compelled to arbitration.  It is not enough that an arbitration agreement state that the agreement is enforceable “as permitted by law.” Courts can and will look at the state of law at the time the parties entered into the agreement to determine enforceability of agreement against specific claims. In denying the employer’s motion to compel arbitration, that is exactly what the Appellate District Court did in Billy Ford v. The Silver F., Inc., No. C099113 (Cal. Ct. App. April 8, 2025).

Key Case Details

As part of his new hire documents in 2018, Plaintiff Billy Ford signed an arbitration agreement with Defendant The Silver F, Inc. dba Parkwest Casino Lotus (Parkwest). The arbitration agreement contained a clause stating it “does not apply” to claims for workers’ compensation or unemployment compensation, specified administrative complaints, Employment Retirement Income Security Act (ERISA) claims, or “representative claims under [PAGA].”  The arbitration agreement also contained a class, collective, and representative action waiver and a severability clause.

In February 2022, Ford filed a complaint against Parkwest alleging a single cause of action under PAGA. Relying on the 2018 arbitration agreement, Parkwest moved to compel arbitration of Ford’s “individual” claims and to dismiss Ford’s “representative” PAGA claims. Parkwest’s motion was based on Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 648-649 (Viking River), which established that PAGA claims are divisible into “individual” and “representative” components, with the individual claims being subject to arbitration. Ford opposed the motion, arguing that the arbitration agreement excluded both individual and representative claims from the scope of arbitration. The trial court denied Parkwest’s motion.

Defendant’s Reliance on Viking River Cruises

Parkwest argued that under Viking River, PAGA claims are “representative” in two ways and, because the term “representative” has two possible meanings, the exclusion for “representative claims under [PAGA]” was, at best, ambiguous about whether it was intended to exclude all PAGA claims or only those nonindividual claims that Ford might assert on behalf of other employees.  Parkwest argued that such ambiguity should be resolved in favor of arbitration and permit arbitration of Ford’s individual PAGA claims.

The Court of Appeal’s Reasoning for Affirming the Trial Court’s Order

The Court of Appeal stated that the fundamental goal of contract interpretation is to give effect to the mutual intent of the parties at the time of contract formation.  The Court of Appeal rejected Parkwest’s argument that the arbitration agreement should be read as only excluding “non-individual” PAGA claims because at the time the arbitration agreement was executed by Ford, in 2018, California law was settled that every PAGA action was a “representative” action and that PAGA claims could not be split into “individual” and “representative” components. Thus, the Court of Appeal held that the only reasonable interpretation for the “representative claims under [PAGA]” carveout was to exclude all PAGA claims.

Key Takeaways

The decision in Ford underscores the importance of keeping arbitration agreements up to date.  The intent of arbitration agreements is to enable parties to resolve employment-related claims in arbitration rather than in court.  As the laws change, it is important that arbitration agreements be updated to keep pace with developments in the law to enhance enforceability of the agreement.  And to be clear, this means tracking developments in the law and entering into new agreements between the employer and employee when warranted as the law continues to develop.

Employers with questions regarding how to craft a compliant arbitration agreement may contact the authors of this post or their usual counsel at AALRR.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.

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