Julian v. Glenair, Inc. ( 2017 )

Filed 12/13/17 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
MALISSA JULIAN et al., B277064
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC597683)
v.
ORDER MODIFYING
GLENAIR, INC., OPINION AND DENYING
PETITION FOR REHEARING
Defendant and Appellant.
[NO CHANGE IN
JUDGMENT]
THE COURT:*
It is ordered that the opinion filed herein on November 27, 2017 be
modified as follows:
On page 4, line 8, after “[the Rojas action].”, insert the following
footnote:
“The proposed agreement further provided that “to the extent
permitted by law, for any claims for which you are seeking relief
as a private attorney general on behalf of a government entity as a
representative action, both you and [Glenair] agree that any such
dispute shall be resolved on an individual basis only under this
Program . . . , and that such an action may not be used to resolve
the claims or rights of other employees or individuals in a single
proceeding . . . .””
On page 19, lines 10 though 20, delete:
“Here, the arbitration agreement also contains a provision barring
such claims, but Glenair’s petition to compel did not attempt to
enforce that provision. Rather, before the trial court and on
appeal, Glenair has contended only that the agreement obliges
respondents to submit their PAGA claim as a whole to
arbitration.
In order to resolve Glenair’s contention, we must examine
the circumstances under which employees may agree to arbitrate
PAGA claims, thereby waiving their right to assert those claims
in a judicial forum.”
And substitute:
“Here, the arbitration agreement also bars such claims “to the
extent permitted by law,” but Glenair’s petition to compel
requested only an order that respondents submit their claims to
arbitration as required under the agreement, and a stay of court
proceedings. For the reasons explained below, we conclude that
to the extent the petition sought arbitration of respondents’
claims, the agreement constituted an unenforceable predispute
waiver of respondents’ right to litigate their claims in court. In
view of Iskanian, our conclusion necessarily implies as a
corollary that the agreement also constituted an unenforceable
predispute waiver of respondents’ right to assert PAGA claims on
behalf of other employees in any forum. (Iskanian, supra, 59
Cal.4th at pp. 382-383.) The focus of our inquiry is therefore on
the predispute/postdispute boundary relating to agreements that
require arbitration of PAGA claims in lieu of litigation in court.
In order to resolve that issue, we must examine the
circumstances under which employees may agree to arbitrate
2
PAGA claims, thereby waiving their right to assert those claims
in a judicial forum.”
Glenair’s petition for rehearing is denied. The modification does not
change the judgment.
_________________________________________________________________
*EPSTEIN, P. J. WILLHITE, J. MANELLA, J.
3
Filed 11/27/17 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
MALISSA JULIAN et al., B277064
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC597683)
v.
GLENAIR, INC.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, John Shepard Wiley, Jr., Judge. Affirmed.
Gibson, Dunn & Crutcher, Jesse A. Cripps, Sarah E.
Gerdes, and Sarah Zenewicz for Defendant and Appellant.
Matern Law Group, Matthew J. Matern and Tagore
Subramaniam for Plaintiffs and Respondents.
__________________________________
Appellant Glenair, Inc., challenges the denial of its motion to
compel arbitration of respondents’ claim under the Labor
Code Private Attorneys General Act of 2004 (PAGA; Lab.
Code, § 2698 et seq.). Glenair contends an agreement
respondents executed during their employment with the
company was an enforceable postdispute agreement
obligating them to arbitrate the claim. We hold that an
agreement to arbitrate a PAGA claim, entered into before an
employee is statutorily authorized to bring such a claim on
behalf of the state, is an unenforceable predispute waiver.
As any agreement by respondents was entered into before
they were authorized to bring a PAGA claim, the trial court
properly denied the petition to compel.
RELEVANT FACTUAL AND
PROCEDURAL BACKGROUND
A. Events Preceding Underlying Action
Respondents Malissa and Machele Julian began their
employment with Glenair, respectively, in 2012 and 2013.1
In April 2013, an action was commenced against Glenair
(L.A. County Super. Ct. Case No. BC505602) in which
Roxane Rojas was ultimately identified as the principal
named plaintiff (the Rojas action). Rojas’s first amended
complaint, filed February 14, 2014, asserted putative class
1 As respondents share their surname and are sisters,
we refer to them by their first names.
2
claims based on alleged violations of the Labor Code and the
unfair competition law (Bus. & Prof. Code, § 17200 et seq.),
as well as a PAGA claim for civil penalties.
In July 2014, Glenair served its hourly employees with
a proposed arbitration agreement entitled “Glenair Dispute
Resolution Program.” The proposed agreement informed
employees that if they did not “opt out,” their continued
employment with Glenair manifested consent to mandatory
arbitration of a broad range of claims, including claims for
wages or other compensation due, meal or rest periods, and
“violation of applicable federal, state or local law, statute,
ordinance, or regulation. The proposed agreement further
stated that it was governed by the Federal Arbitration Act
(FAA; 9 U.S.C. § 1 et seq.), and that the parties’ intent was
that “the FAA shall preempt all [s]tate laws to the fullest
extent permitted by law.”
In bold capital letters with underlining, the proposed
agreement provided: “Your decision to participate in the
[program] is completely voluntary. You may opt[]out of the
[program] within 30 calendar days of receipt. Your decision
to participate or not participate in the program will have no
effect on your work with Glenair. If you do not opt[]out . . . :
(1) Mandatory arbitration is your . . . sole and exclusive
means of resolving past, present, and future claims,
controversies, and disputes between you and the
company covered by this program;
3
(2) You will not be able to participate in any class or
collective action covered by this program, including
. . . [the Rojas action]; and
(3) To the extent permitted by law, you will not be able
to participate in any representative action that seeks to
resolve whether individuals other than you have been
subject to violations of the law, including . . . [the Rojas
action].”
The proposed agreement contained a description of the
claims then asserted in the Rojas action, including the
PAGA claim.
On July 16, 2014, Glenair distributed copies of the
proposed agreement to its hourly employees by first class
mail. When the copy sent to Machele was returned as
undeliverable, Stephen Bruce, an attorney employed by
Glenair, personally observed her supervisor give her a copy
of the proposed agreement. Neither respondent took any
action to opt out of the proposed agreement.
In January 2015, respondents’ employment was
terminated. In late 2014 or early 2015, a third amended
complaint was filed in the Rojas action that asserted no
PAGA claim. In April 2015, attorney Bruce received a copy
of a proposed fourth amended complaint in the Rojas action,
which identified respondents as additional named plaintiffs
and contained a PAGA claim. Later, in May 2015, Glenair
sent a demand for arbitration to respondents and their
counsel, who also represented the existing named plaintiffs
4
in the Rojas action. Respondents did not answer the
demand for arbitration, and the proposed fourth amended
complaint in the Rojas action was never filed.
B. Underlying Action
In October 2015, respondents initiated the underlying
action against Glenair. Their complaint contains a single
claim under PAGA for civil penalties “on behalf of
themselves and other current and former non-exempt
employees” of appellants. The claim is predicated on alleged
violations of the Labor Code and Industrial Welfare
Commission Wage Order No. 1-2001 (Wage Order 1-2001).2
The complaint asserts that respondents are “‘aggrieved
employees’” for purposes of a representative action under
PAGA, and that they complied with the requirements for
commencing a representative action under PAGA.
2 The claim seeks penalties for failure to provide meal
and rest periods (Lab. Code, § 226.7; Wage Order No. 1-2001,
§§ 11-12), failure to pay overtime wages (Lab. Code, §§ 510,
1194, 1198; Wage Order No. 1-2001, § 3), failure to pay
minimum wages (Lab. Code, §§ 1194, 1198; Wage Order No.
1-2001, § 4 ), failure to pay timely wages (Lab. Code, § 204),
failure to pay all wages due to former employees (Lab. Code,
§§ 201, 202, 203), failure to maintain records (Lab. Code
§§ 226, subd. (a), 1174, subd. (d); Wage Order No. 1-2001,
§ 7), failure to furnish itemized wage statements (Lab. Code,
§ 226, subd. (a); Wage Order No. 1-2001, § 7), and failure to
indemnify employees for work-related expenses (Lab. Code,
§ 2802).
5
Glenair filed a petition for an order to compel
arbitration of respondents’ claim (Code Civ. Proc., § 1281.2).
Relying on Iskanian v. CLS Transportation Los Angeles,
LLC (2014) 59 Cal.4th 348, 382 (Iskanian), Glenair
maintained that respondents, in the course of their
employment, signed an enforceable voluntary postdispute
arbitration agreement that encompassed their claim.
Glenair argued that in Iskanian, our Supreme Court
prohibited predispute waivers of PAGA claims, but approved
postdispute waivers of PAGA claims by employees aware of
Labor Code violations.
Respondents opposed the petition, contending they
entered into no enforceable agreement requiring arbitration
of their PAGA claim. They argued that they were insuffi-
ciently aware of their right to assert a PAGA claim when
they failed to opt out of the proposed agreement. Addition-
ally, they argued that the agreement was unenforceable due
to procedural and substantive unconscionability.
In support of those contentions, respondents relied on
their own declarations. Malissa stated that prior to her
termination, she never received the proposed arbitration
agreement, and had no knowledge of the proposed
agreement, the Rojas action, and her potential claims
against Glenair. Machele stated that in July 2014, her boss
handed her the proposed arbitration agreement. She tried to
read it but did not understand it, and decided that she did
not want to participate in the dispute resolution program.
She took no further action, believing that the agreement
6
would bind her only if she signed it. Machele further stated
that prior to her termination, she was unaware of the Rojas
action and her potential claims against Glenair.
On April 18, 2016, the trial court issued a tentative
ruling denying Glenair’s petition. The court first discussed
Iskanian and its progeny, stating: “Iskanian establishes that
a predispute arbitration clause . . . cannot be used to compel
arbitration of PAGA claims.” Turning to the subject of
postdispute waivers, the court stated: “Conceivably, our
Supreme Court would allow postdispute arbitration
agreements to cover PAGA claims because, at that point, an
employee would be represented by counsel who could weigh
the benefits and risks of proceeding in arbitration rather
than superior court. [¶] In this case, [respondents] were not
represented by counsel when they allegedly agreed to
arbitration.” On October 6, 2016, at the parties’ request, the
court entered the tentative ruling as its final order.3
3 Glenair’s notice of appeal was premature, as the appeal
was taken from an August 3, 2016 announcement on the
trial court’s message board that the tentative ruling was the
court’s order, rather than from a final ruling entered in the
court records. (7 Witkin, Cal. Procedure (5th ed. 2008)
Judgment, § 54, p. 590 [a ruling does not become effective
until filed in writing or entered in the minutes].) However,
because respondents did not object to the premature notice
of appeal and instead joined Glenair in requesting the entry
of a final order, we find good cause to treat the notice as
having been filed immediately after the October 6, 2016
(Fn. is continued on the next page.)
7
DISCUSSION
Glenair challenges the denial of its petition to compel
arbitration, arguing that under Iskanian, the agreement at
issue constituted an enforceable postdispute arbitration
agreement encompassing respondents’ PAGA claim. For the
reasons discussed below, we affirm the denial because the
agreement is an unenforceable predispute agreement.
A. Standard of Review
A petition to compel arbitration is a suit in equity
seeking specific performance of an arbitration agreement.
(Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203
Cal.App.4th 336, 347.) Under Code of Civil Procedure
section 1281.2, a petition to compel arbitration of a claim
may be denied when the arbitration agreement is
unenforceable (Robertson v. Health Net of California, Inc.
(2005) 132 Cal.App.4th 1419, 1425 (Robertson)) or the claim
is not subject to the arbitration agreement (Fitzhugh v.
Granada Healthcare & Rehabilitation Center, LLC (2007)
150 Cal.App.4th 469, 474 (Fitzhugh); see Sky Sports, Inc. v.
Superior Court (2011) 201 Cal.App.4th 1363, 1367-1368).
Generally, the standard of review applicable to the
denial of a petition to compel arbitration is determined by
the issues presented on appeal (Robertson, supra, 132
order. (Cal. Rules of Court, rule 8.104(d)(2)); Stonewall Ins.
Co. v. City of Palos Verdes Estates (1996) 46 Cal.App.4th
1810, 1827-1828.)
8
Cal.App.4th at p. 1425). To the extent the denial relies on a
pertinent factual finding, we review that finding for the
existence of substantial evidence.4 (Nyulassy v. Lockheed
Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.) In
contrast, to the extent the denial relies on a determination of
law, we review the trial court’s resolution of that
determination de novo. (Ibid.) Nonetheless, we are not
bound by the trial court’s rationale, and thus may affirm the
denial on any correct legal theory supported by the record,
even if the theory was not invoked by the trial court. (Shaw
v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 268-
269; Cheng-Canindin v. Renaissance Hotel Associates (1996)
50 Cal.App.4th 676, 683, fn. 3; Chan v. Drexel Burnham
Lambert, Inc. (1986) 178 Cal.App.3d 632, 645 & fn. 6; see
4 Glenair was entitled to request a statement of decision
regarding the denial, but did not do so. (Acquire II, Ltd. v.
Colton Real Estate Group (2013) 213 Cal.App.4th 959, 970.)
Generally, the failure to request a statement of decision
triggers the doctrine of implied factual findings, under which
the appellate court “presumes the trial court made all
necessary findings supported by substantial evidence.”
(Ibid.) In applying that doctrine, we would ordinarily infer
that the trial court resolved contested factual issues -- for
example, whether Malissa received the proposed agreement
and whether Machele understood it -- in a manner favorable
to the trial court’s ruling. However, we do not employ the
doctrine because -- as we explain below -- the ruling is
properly affirmed on a ground established by the record but
not set forth in the trial court’s order.
9
J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co.
(1997) 59 Cal.App.4th 6, 15-16.)
The parties disagree regarding the trial court’s
rationale for its ruling, and thus dispute the applicable
standard of review. Their disagreement relates to whether
the court actually found that the arbitration agreement in
question was a postdispute -- rather than a predispute --
agreement. Glenair asserts that its contention on appeal
requires de novo review, arguing that the court correctly
recognized the arbitration agreement to be a postdispute
agreement, but made an erroneous determination of law,
namely, that the agreement was unenforceable because
respondents were unrepresented by counsel when they failed
to opt out of the proposed agreement. In contrast,
respondents maintain that the court’s ruling may be
affirmed on several grounds requiring different standards of
review. Their principal contention is that the court correctly
found that the agreement was a predispute agreement
unenforceable under Iskanian.
A careful reading of the trial court’s order reveals that
the court did not resolve whether any agreement was
predispute or postdispute, but concluded that the “alleged[]”
agreement was unenforceable regardless. The court’s
apparent rationale for the ruling was (1) that if the
“alleged[]” agreement was a predispute agreement, it was
unenforceable under Iskanian, and (2) that if it was a
postdispute agreement, it was unenforceable due to an
undisputed fact, namely, respondents’ lack of representation.
10
As explained below (see pt. D. of the Discussion, post), we
conclude that the record discloses an unenforceable
predispute agreement.
B. PAGA
We begin by setting forth the relevant elements of
PAGA. Under the Labor Code, the California Labor and
Workforce Development Agency (LWDA) and its constituent
departments and divisions are authorized to collect civil
penalties for specified labor law violations by employers.
(Caliber Bodyworks, Inc. v. Superior Court (2005) 134
Cal.App.4th 365, 370 (Caliber Bodyworks).) To enhance the
enforcement of the labor laws, the Legislature enacted
PAGA. (Caliber Bodyworks, supra, at p. 370.) PAGA
permits aggrieved employees to recover civil penalties that
previously could be collected only by the LWDA, as well as
newly established “default” penalties. (Dunlap v. Superior
Court (2006) 142 Cal.App.4th 330, 335; Caliber Bodyworks,
supra, at p. 375; Lab. Code, § 2699, subds. (a), (f).)
Under PAGA, “an ‘aggrieved employee’ may bring a
civil action personally and on behalf of other current or
former employees to recover civil penalties for Labor Code
violations. [Citation.][] Of the civil penalties recovered, 75
percent goes to the [LWDA], leaving the remaining 25
percent for the ‘aggrieved employees.’ [Citation.]” (Arias v.
Superior Court (2009) 46 Cal.4th 969, 980-981 (Arias), fn.
omitted.) As the LWDA has “the initial right to prosecute
and collect civil penalties” under the Labor Code, PAGA
11
requires aggrieved employees to provide a specified notice to
LWDA before asserting a PAGA claim. (Caliber Bodyworks,
Inc., supra, 134 Cal.App.4th at pp. 376-377.)
PAGA actions are “a substitute for an action by the
government itself,” in which the aggrieved employee acts as
“the proxy or agent of the state’s labor law enforcement
agencies.” (Arias, supra, 46 Cal.4th at p. 986.) As explained
in Iskanian, “[a] representative PAGA claim is a type of qui
tam action. ‘Traditionally, the requirements for enforcement
by a citizen in a qui tam action have been (1) that the statute
exacts a penalty; (2) that part of the penalty be paid to the
informer; and (3) that, in some way, the informer be
authorized to bring suit to recover the penalty.’ [Citation.]
The PAGA conforms to these traditional criteria, except that
a portion of the penalty goes not only to the citizen bringing
the suit but to all employees affected by the Labor Code
violation.” (Iskanian, supra, 59 Cal.4th at p. 382.)5
5 We observe that Iskanian applies the term
“representative” to PAGA claims in two distinct ways.
Iskanian characterizes PAGA claims as representative
because they are brought by employees acting as
representatives -- that is, as agents or proxies -- of the state.
(Iskanian, supra, 59 Cal.4th at p. 387.) Iskanian also
describes an employee’s PAGA claim as representative when
it seeks penalties on behalf of other employees. (Iskanian,
supra, at pp. 383-384.) When necessary, we clarify the
meaning of “representative” applicable to our analysis.
12
Labor Code section 2699.3, subdivision (a), sets forth
the procedures with which an aggrieved employee must
comply in order to commence a PAGA action of the type
asserted by respondents. During the period pertinent here,
the required procedures were as follows: “The aggrieved
employee must ‘give written notice of the alleged Labor Code
violation to both the employer and the [LWDA], and the
notice must describe facts and theories supporting the
violation. [Citation.] If the agency notifies the employee and
the employer that it does not intend to investigate . . . , or if
the agency fails to respond within 33 days, the employee
may then bring a civil action against the employer.
[Citation.] If the agency decides to investigate, it then has
120 days to do so. If the agency decides not to issue a
citation, or does not issue a citation within 158 days after
the postmark date of the employee’s notice, the employee
may commence a civil action.” (Thurman v. Bayshore
Transit Management, Inc. (2012) 203 Cal.App.4th 1112,
1148-1149, quoting Arias, supra, 46 Cal.4th at p. 981.)
Two features of PAGA claims are notable here. Under
the PAGA statutory scheme, an employee authorized to
assert a PAGA action is not subject to LWDA supervision.
(Iskanian, supra, 59 Cal.4th at pp. 389-390.) In Iskanian,
our Supreme Court held that the lack of supervision does not
contravene the constitutional principle of separation of
powers, concluding that in view of scarce budgetary
resources, the Legislature’s enactment of PAGA represented
a legitimate choice “to deputize and incentivize employees
13
uniquely positioned to detect and prosecute [Labor Code]
violations.” (Iskanian, supra, at p. 390.) The court rejected
the contention that PAGA actions represent an abuse of
governmental power, stating that a PAGA plaintiff, like a
qui tam plaintiff, “has only his or her own resources and may
incur significant cost if unsuccessful.” (Iskanian, supra, at
p. 391.)
Furthermore, nothing in the PAGA statutory scheme
forecloses separate but similar actions by different
employees against the same employer. (Tan v. GrubHub,
Inc. (N.D. Cal. 2016) 171 F.Supp.3d 998, 1012-1013 (Tan).)
Our Supreme Court has explained that the doctrine of
collateral estoppel, rather than the statutory scheme, shields
the employer from an abusive “‘one-way intervention,’” that
is, a series of PAGA actions by different employees that
would continue until some employee prevailed. (Arias,
supra, 46 Cal.4th at pp. 984-987.) Because an employee’s
PAGA action “functions as a substitute for an action brought
by the government itself,” under the doctrine of collateral
estoppel, a judgment unfavorable to the employee binds the
government, as well as all aggrieved nonparty employees
potentially entitled to assert a PAGA action. (Arias, supra,
at p. 986.)
C. Iskanian
We turn to the discussion of PAGA claim waivers in
Iskanian. There, the plaintiff, in the course of his
employment, signed an agreement subject to the FAA,
14
providing that all claims arising out his employment were to
be submitted to arbitration. (Iskanian, supra, 59 Cal.4th at
p. 360.) The agreement further provided that the parties
would not assert representative claims against each other.
(Ibid.) When the plaintiff alleged claims against his
employer for Labor Code violations, including a PAGA claim,
the trial court granted the employer’s petition to compel
arbitration, concluding that the plaintiff was obliged to
arbitrate the PAGA claim, and was barred from litigating
that claim on behalf of employees other than himself.
(Iskanian, supra, at pp. 361-362.)
Our Supreme Court examined two related questions,
namely, whether arbitration agreements obliging employees
to waive their right to bring representative PAGA actions in
any forum are unenforceable under state law, and whether
the FAA preempts any state law rule precluding such
waivers. (Iskanian, supra, 59 Cal.4th at pp. 382-383.)
Regarding the first question, the court held that predispute
waivers -- that is, waivers made “before any dispute arises”
-- requiring employees as a condition of employment to give
up the right to assert a PAGA claim on behalf of other
employees, are unenforceable, concluding that they “harm
the state’s interest in enforcing the Labor Code,” and thus
are contrary to public policy. (Iskanian, supra, at pp. 360-
361, 383-384, 388.) Although the court recognized that the
plaintiff’s waiver potentially permitted him to assert an
individualized PAGA claim, the court declined to decide
whether such a claim was cognizable, stating that “a
15
prohibition of representative claims” -- that is, claims on
behalf of other employees -- “frustrates the PAGA’s
objectives.” (Iskanian, at p. 384, italics omitted.)
Regarding the second question, the court held that the
FAA did not preempt the state law rule invalidating waivers
of the type described above, stating: “[A] PAGA claim lies
outside the FAA’s coverage because it is not a dispute
between an employer and an employee arising out of their
contractual relationship. It is a dispute between an
employer and the state, which alleges directly or through its
agents -- either the [LWDA] or aggrieved employees -- that
the employer has violated the Labor Code.” (Iskanian, supra,
59 Cal.4th at p. 386.) The court explained: “[T]he FAA aims
to promote arbitration of claims belonging to the private
parties to an arbitration agreement. It does not aim to
promote arbitration of claims belonging to a government
agency, and that is no less true when such a claim is brought
by a statutorily designated proxy for the agency as when the
claim is brought by the agency itself. The fundamental
character of the claim as a public enforcement action is the
same in both instances.” (Id. at p. 388.)
Our focus is on the Supreme Court’s rationale for
limiting its holding to predispute waivers. In examining the
extent to which the right to assert a PAGA claim may be
waived, the court relied on Civil Code section 1668, which
invalidates contracts that exempt their parties from
“violation[s] of law,” and Civil Code section 3513, which
invalidates private contracts that contravene “a law
16
established for a public reason . . . .”6 (Iskanian, supra, 59
Cal.4th at pp. 382-383.) Applying those statutes, the court
determined that a waiver of the right to assert a PAGA claim
in any forum “disable[d] one of the primary mechanisms for
enforcing the Labor Code” and harmed the state’s interests
in enforcing that code. (Iskanian, supra, at p. 383.)
The court nonetheless imposed a limit on its
determination, stating: “Of course, employees are free to
choose whether or not to bring PAGA actions when they are
aware of Labor Code violations. [Citation.] But it is
contrary to public policy for an employment agreement to
eliminate this choice altogether by requiring employees to
waive the right to bring a PAGA action before any dispute
arises.” (Iskanian, supra, 59 Cal.4th at p. 383.) In support
of this remark, the court pointed to footnote 8 in Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24
Cal.4th 83, 103, fn. 8 (Armendariz) as authority for the
proposition that “waivers freely made after a dispute has
6 Civil Code section 1668 provides that “[a]ll contracts
which have for their object, directly or indirectly, to exempt
anyone from responsibility for his own fraud, or willful
injury to the person or property of another, or violation of
law, whether willful or negligent, are against the policy of
the law.”
Civil Code section 3513 states: “Any one may waive
the advantage of a law intended solely for his benefit. But a
law established for a public reason cannot be contravened by
a private agreement.”
17
arisen are not necessarily contrary to public policy.”
(Iskanian, supra, 59 Cal.4th at p. 383.)
The footnote in question occurs in the context of a
discussion of the arbitrability of claims under the California
Fair Employment and Housing Act (FEHA; Gov. Code,
§ 12900 et seq.). In Armendariz, two employees executed
arbitration agreements as a condition of their employment.
(Armendariz, supra, 24 Cal.4th at pp. 91-92.) After they
asserted FEHA claims against the employer, the trial court
denied the employer’s petition to compel arbitration,
concluding that the agreement was unenforceable.
(Armendariz, supra, at pp. 92-93.) Applying Civil Code
sections 1668 and 3513, our Supreme Court determined that
an arbitration agreement may not operate to waive FEHA
statutory rights implementing the public policy against
discrimination. (Armendariz, supra, at pp. 100-101.) The
court nonetheless concluded that an agreement to arbitrate
FEHA claims was potentially enforceable if it imposed
requirements on arbitration sufficient to preserve the
unwaiveable FEHA rights. (Armendariz, at pp. 102-103.)
In the pertinent footnote in Armendariz, the court
explained that those requirements related to mandatory
employment arbitration agreements. (Armendariz, supra, 24
Cal.4th at p. 103, fn. 8.) The court stated: “These
requirements would generally not apply in situations in
which an employer and an employee knowingly and
voluntarily enter into an arbitration agreement after a
dispute has arisen. In those cases, employees are free to
18
determine what trade-offs between arbitral efficiency and
formal procedural protections best safeguard their statutory
rights.” (Ibid.)
D. Analysis
We confront an issue regarding the waivability of
PAGA claims that is distinct from the issue presented in
Iskanian. There, the employer sought to enforce an
employee’s waiver of the right to assert a PAGA claim on
behalf of other employees in any forum. Here, the
arbitration agreement also contains a provision barring such
claims, but Glenair’s petition to compel arbitration did not
attempt to enforce that provision. Rather, before the trial
court and on appeal, Glenair has contended only that the
agreement obliges respondents to submit their PAGA claim
as a whole to arbitration.
In order to resolve Glenair’s contention, we must
examine the circumstances under which employees may
agree to arbitrate PAGA claims, thereby waiving their right
to assert those claims in a judicial forum. As discussed
further below, at least two appellate courts have concluded
that predispute agreements to arbitrate PAGA claims are
unenforceable for reasons that we find persuasive.
(Betancourt v. Prudential Overall Supply (2017) 9
Cal.App.5th 439, 445-446 (Betancourt); Tanguilig v.
Bloomingdale’s, Inc. (2016) 5 Cal.App.5th 665, 678
(Tanguilig).) Accordingly, with respect to waivers of the
right to assert a PAGA claim in a judicial forum, the key
19
issue concerns the boundary between an unenforceable
predispute waiver and an enforceable postdispute waiver.
The parties have not identified -- and our research had not
disclosed -- any decision addressing that issue.
However, although Iskanian does not draw the boundary in
question, it establishes that the boundary is determined by
two factors, namely, the employee’s capacity to make a
knowing and voluntary choice of forum based on an adequate
awareness of Labor Code violations supporting a PAGA
claim, and the absence of public policy considerations
attendant to the loss of the judicial forum (see pt. C. of the
Discussion, ante).
Those factors dictate that the predispute/postdispute
boundary is crossed when the pertinent employee is
authorized to commence a PAGA action as an agent of the
state. Generally, a waiver of a statutory right is not
enforceable unless -- at minimum -- “‘it appears that the
party executing it ha[s] been fully informed of the existence
of that right, its meaning, [and] the effect of the “waiver”
presented to him’” (Hittle v. Santa Barbara County
Employees Retirement Assn. (1985) 39 Cal.3d 374, 389,
quoting Bauman v. Islay Investments (1973) 30 Cal.App.3d
752, 758). Only after employees have satisfied the statutory
requirements for commencing a PAGA action are they in a
position “to determine what trade-offs between arbitral
efficiency and formal procedural protections best safeguard
their statutory rights.” (Armendariz, supra, 24 Cal.4th at p.
103, fn. 8.) Prior to that point, the employees either have
20
submitted no allegations of Labor Code violations to LWDA,
or have done so, but await LWDA’s determination regarding
the extent to which LWDA itself will resolve the allegations
(see Tan, supra, 171 F.Supp.3d at p. 1012 [explaining that
PAGA bars employee from asserting claim based on a
violation for which LWDA has cited employer]). Accordingly,
before meeting the statutory requirements for commencing a
PAGA action, employees do not know which alleged
violations -- if any -- they are authorized to assert in the
action. Enforcing a waiver secured at that time would
effectively dictate a choice of forum the employee did not
knowingly make.
Enforcing a waiver executed before the employee has
satisfied the statutory requirements would also impair
PAGA’s enforcement mechanism. As explained below, until
the employee meets those requirements, the state -- through
LWDA -- retains control of the right underlying the
employee’s PAGA claim. For that reason, enforcing the
arbitration agreement would contravene the state’s control
over that right.
Although Iskanian did not expressly examine the
circumstances under which parties may lawfully agree to
subject PAGA claims to arbitration, it characterized a PAGA
claim as a dispute between the state and the employer, in
which the plaintiff acts as the agent of the state.7 (Iskanian,
7 We recognize that in Iskanian, the court, in remanding
the matter before it for further proceedings, suggested that
(Fn. is continued on the next page.)
21
supra, 59 Cal.4th at pp. 386-389.) Following Iskanian, two
appellate courts have concluded that a predispute agreement
to arbitrate is ineffective to compel arbitration of a PAGA
claim, as the employee who signs the agreement is not then
authorized to waive the state’s right to a judicial forum.
(Betancourt, supra, 9 Cal.App.5th at pp. 445-448; [PAGA
action not subject to arbitration, as state not bound by
employee’s predispute agreement]; Tanguilig, supra, 5
Cal.App.5th at pp. 677-680 [PAGA claim cannot be
arbitrated pursuant to predispute arbitration agreement
without state’s consent].) We agree.
In Iskanian, our Supreme Court explained that “every
PAGA action, whether seeking penalties for Labor Code
violations as to only one aggrieved employee -- the plaintiff
bringing the action -- or as to other employees as well, is a
representative action on behalf of the state.” (Iskanian,
the parties might properly agree to arbitration of the
plaintiff’s PAGA claim, stating: “[The defendant] must
answer the representative PAGA claim[]”-- that is, the claim
seeking penalties on behalf of the plaintiff and other
employees -- “in some forum.” (Iskanian, supra, 59 Cal.4th
at p. 391.) Neither these remarks, nor any others in
Iskanian, purport to address when an agreement to arbitrate
a PAGA claim constitutes an enforceable postdispute
agreement, as they are unaccompanied by any discussion of
that issue. (See Santa Clara County Local Transportation
Authority v. Guardino (1995) 11 Cal.4th 220, 243 [“[A]n
opinion is not authority for an issue not considered
therein”].)
22
supra, 59 Cal.4th at p. 387, quoting id. at p. 394, conc. opn.
of Chin, J.) A PAGA action is thus ultimately founded on a
right belonging to the state, which -- though not named in
the action -- is the real party in interest. (Iskanian, supra,
at p. 387.) That is because PAGA does not create any new
substantive rights or legal obligations, but “is simply a
procedural statute allowing an aggrieved employee to
recover civil penalties -- for Labor Code violations -- that
otherwise would be sought by state labor law enforcement
agencies.” (Amalgamated Transit Union, Local 1756, AFL-
CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.)
Ordinarily, when a person who may act in two legal
capacities executes an arbitration agreement in one of those
capacities, the agreement does not encompass claims the
person is entitled to assert in the other capacity. (Fitzhugh,
supra, 150 Cal.App.4th at pp. 474-475 [son who executed
arbitration agreement for father did not subject his own
claims as an individual to arbitration]; Benasra v. Marciano
(2001) 92 Cal.App.4th 987, 990 [corporate officer who
executed arbitration agreement as agent for the corporation
did not subject his claims as individual to arbitration]; see
Goliger v. AMS Properties, Inc. (2004) 123 Cal.App.4th 374,
377 [daughter who executed arbitration agreement relating
to mother’s medical treatment solely as party responsible for
mother’s medical payments, and not as mother’s agent, did
not subject mother’s claims to arbitration].) That rule
reflects general principles regarding the significance of legal
capacities. (Benasra, supra, at p. 990.)
23
Under the rule set forth above, an arbitration
agreement executed before an employee meets the statutory
requirements for commencing a PAGA action does not
encompass that action. Prior to satisfying those
requirements, an employee enters into the agreement as an
individual, rather than as an agent or representative of the
state. As an individual, the employee is not authorized to
assert a PAGA claim; the state -- through LWDA -- retains
control of the right underlying any PAGA claim by the
employee. Thus, such a predispute agreement does not
subject the PAGA claim to arbitration. (See Betancourt,
supra, 9 Cal.App.5th at p. 448; Tanguilig, supra, 5
Cal.App.5th at pp. 677-680; Mikes v. Strauss (S.D.N.Y. 1995)
889 F.Supp. 746, 755 [arbitration agreement plaintiff
executed as an individual did not encompass plaintiff’s qui
tam claim as a “private representative of the government”
because “the government was not a party to the
[a]greement”].) For that reason, enforcing any such
agreement would impair PAGA’s enforcement mechanism.
Here, the record establishes that Glenair distributed
the proposed agreement to respondents and other employees
in July 2014, long before respondents initiated the procedure
for becoming the state’s agents by submitting a notice of
Labor Code violations to the LWDA in April 2015. As the
proposed agreement required employees to opt out within 30
days, it necessarily constituted a predispute arbitration
agreement with respect to respondents’ PAGA action. The
court thus did not err in declining to enforce it.
24
Glenair maintains that the arbitration agreement must
be regarded as an enforceable postdispute agreement,
arguing that the agreement described the Labor Code
violations and PAGA claim alleged in the Rojas action, and
that respondents’ action asserts an essentially similar PAGA
claim. According to Glenair, the Rojas action and the
underlying action involve the same dispute, for purposes of
classifying the agreement as “predispute” or “postdispute.”
The crux of Glenair’s contention is that after the Rojas
plaintiff was authorized to assert a PAGA claim against
Glenair and Glenair’s other employees received suitable
notice of that fact, the predispute/postdispute boundary was
crossed with respect to all the other employees, including
respondents, relating to any similar PAGA claim by them.
We disagree.
In our view, under the principles and public policy
considerations set forth in Iskanian, the classification of an
agreement as “predispute” or “postdispute” must be made by
reference to the point at which an individual employee
acquires the status of the state’s agent. Although Iskanian
characterized a PAGA claim as a dispute between the state
and an employer, it identified the PAGA plaintiff as the
state’s agent in the resolution of the dispute. (Iskanian,
supra, 59 Cal.4th at pp. 386-387.) As noted above (see pt. B.
of the Discussion, ante), PAGA does not foreclose separate
but similar actions by different employees against the same
employer. PAGA thus permits the state -- through LWDA --
25
to designate more than one employee to act as its agent in a
dispute with a particular employer.
Because those employees must individually satisfy the
statutory requirements in order to assert a PAGA claim, the
principles set forth in Iskanian dictate that with respect to
each such employee, LWDA retains control of the right
underlying that employee’s PAGA claim until the employee
meets the requirements for becoming the state’s agent.
Accordingly, with respect to each such employee, an
arbitration agreement executed prior to the satisfaction of
those requirements cannot encompass the employee’s PAGA
claim, as the employee is not then the state’s agent.
We thus reject Glenair’s contention that the Rojas
action and respondents’ action represent the same dispute,
for purposes of determining whether the arbitration
agreement constituted an enforceable postdispute
agreement. Specifically, we reject the contention that once
the Rojas plaintiff was authorized to assert a PAGA claim,
the arbitration agreement barred all other employees not so
authorized -- including respondents -- from initiating PAGA
actions, even though they were not then designated as the
state’s agents to assert any specific claim. To accept
Glenair’s position would be to significantly impair PAGA’s
enforcement mechanism, which permits the state to act
through more than one employee with respect to a PAGA
claim against a particular employer. In sum, the trial court
26
did not err in denying Glenair’s petition to compel
arbitration.8
8 In view of our conclusion, it is unnecessary to examine
additional potential grounds for affirming the trial court’s
ruling identified in respondents’ brief.
27
DISPOSITION
The order denying appellants’ petition to compel
arbitration is affirmed. Respondents are awarded their costs
on appeal.
CERTIFIED FOR PUBLICATION
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
28