Labor & Employment Law Blog

When the Supreme Court of the United States issued its landmark decision in AT&T Mobility v. Concepcion we previously discussed here holding that the Federal Arbitration Act preempts contrary state law barring arbitration agreements requiring claimants to pursue their claims individually through arbitration and not by way of a class action lawsuit, many practitioners were optimistic that arbitration agreements could be used to require current or former employees to bring claims for PAGA penalties on an individual basis and not on behalf of other allegedly "aggrieved" current and former employees.

However, as we previously reported here, the California Court of Appeal held in Brown v. Ralph's Grocery Company that the decision of the trial court denying enforcement of a class action waiver contained in an arbitration agreement between Ralph's Grocery Company and its employees was not supported by substantial evidence but held, also, that a provision of that arbitration agreement barring employees from pursuing claims under PAGA is unenforceable because, according to that court, the recent decision of  Supreme Court of the United States in AT&T Mobility v. Concepcion, previously discussed here, does not apply to representative actions brought under PAGA.

As we previously reported here, on July 11, 2011, the California Supreme Court denied review of the Court of Appeal's decision in Brown v. Ralph's Grocery Company that PAGA waivers are not enforceable. 

On April 16, 2012, the United States Supreme Court likewise denied review of the Court of Appeal's decision holding PAGA waivers are unenforceable.

We think the decisions of the California Supreme Court and of the United States Supreme Court to leave undisturbed the decision of the Court of Appeal marks a significant setback 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. Further, as we previously reported here and here, California courts hold that PAGA penalties apply, also, to violations of Industrial Welfare Commission Wage Orders.  

In light of this development, we think employers that have in place or are considering implementing arbitration agreements containing PAGA waivers should promptly consult competent employment law counsel.