Zakaryan v. The Men's Warehouse, Inc. ( 2019 )

Filed 3/28/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
ARTHUR ZAKARYAN, B289192
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC647541)
v.
THE MEN'S WEARHOUSE,
INC., et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County. Richard E. Rico, Judge. Affirmed.
Gartenberg Gelfand Hayton, Aaron C. Gundzik, and
Rebecca G. Gundzik for Plaintiff and Respondent.
Lebe Law, and Jonathan M. Lebe for Plaintiff and
Respondent.
Carothers DiSante and Freudenberger, and Amy S.
Williams for Defendants and Appellants.
Vorys, Sater, Seymour and Pease, Mark A. Knueve, and
Cory D. Catignani for Defendants and Appellants.
******
The Labor Code Private Attorneys General Act of 2004
(PAGA) deputizes individual employees to step into the shoes of
our state’s labor enforcement agency and sue their employers for
underpaid wages and additional, statutorily prescribed amounts
on behalf of themselves and their aggrieved coworkers. (Lab.
Code, § 2698 et seq.) 1 In Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal. 4th 348, 382-392 (Iskanian), our
Supreme Court held that individual employees cannot
contractually agree to arbitrate their potential PAGA claims, but
may still contractually agree to arbitrate their “individual
damages claims.” If an employee brings a solitary PAGA claim,
may a trial court split that claim—that is, may the court send the
employee to arbitration (when he has agreed to it) to recover his
underpaid wages but retain jurisdiction to award the additional,
statutorily prescribed amounts? Our sister courts are divided on
the issue: Esparza v. KS Indus., L.P. (2017) 13 Cal.App.5th 1228
(Esparza) has sanctioned such an order, while Lawson v. ZB,
N.A. (2017) 18 Cal.App.5th 705 (Lawson) has not. Although this
issue is pending before our Supreme Court in Lawson (Lawson,
review granted Mar. 21, 2018, S246711), we analyze the issue
differently than Esparza or Lawson but ultimately conclude that
courts may not split a solitary PAGA claim and send it to two
different fora. Accordingly, we affirm the trial court’s order
denying the motion to compel arbitration in this case.
1 All further statutory references are to the Labor Code
unless otherwise indicated.
2
FACTS AND PROCEDURAL BACKGROUND
I. Facts
Arthur Zakaryan (plaintiff) started working as a store
manager for defendants, The Men’s Wearhouse and Tailored
Brands, Inc. (collectively, The Men’s Wearhouse) in November
2002. As its homophonic name suggests, the Men’s Wearhouse
sells men’s clothing and accoutrement. Due to work performance
issues, The Men’s Wearhouse in early 2016 gave plaintiff the
option of accepting a demotion out of management or resigning.
Plaintiff opted to resign, and did so in February 2016.
By the time of his resignation, plaintiff had signed or by his
conduct agreed to two different arbitration agreements with The
Men’s Wearhouse—one in 2006 and a second in 2015. Under the
terms of the 2006 agreement, plaintiff agreed to arbitrate “any
and all claims, disputes and controversies . . . includ[ing] . . . any
[c]laim arising from [his] employment . . . or its termination,” but
that agreement expressly excluded “collective” or “representative
action[s].” Under the terms of the 2015 agreement, plaintiff
agreed to arbitrate “all claims or controversies . . . whether or not
arising out of [his] employment (or its termination)” and to
“waive any right to bring” “any class, collective, or representative
action,” but that agreement expressly excluded any PAGA claims
“otherwise covered by this Agreement.”
II. Procedural Background
In January 2017, plaintiff sued The Men’s Wearhouse.
“[O]n behalf of all aggrieved employees currently and formerly
employed” as The “Men’s Wearhouse store managers,” plaintiff
alleged a “representative action” under PAGA on the ground that
The Men’s Wearhouse had wrongly misclassified managers as
exempt from California’s laws regarding overtime pay and meal
3
and rest breaks. This underpayment also rendered the
managers’ wage statements inaccurate and entitled those who
had quit or been fired to “waiting time penalties” under section
203. Plaintiff prayed for “unpaid and underpaid wages of all
aggrieved employees,” the additional penalties incorporated into
PAGA from more specific Labor Code provisions, prejudgment
interest, attorney fees and “further and other injunctive and
equitable relief.”
After Esparza was decided, The Men’s Wearhouse filed a
motion to compel arbitration of the portion of plaintiff’s PAGA
claim seeking reimbursement of underpaid wages. The motion to
compel was filed nearly six months after The Men’s Wearhouse
had answered plaintiff’s complaint without raising arbitration as
a defense.
Following full briefing and a hearing, the trial court denied
the motion to compel. The court found Lawson more persuasive
than Esparza, and in so doing rejected the notion that plaintiff’s
PAGA claim could be split in order to send the underpaid wages
portion to arbitration.
The Men’s Wearhouse filed this timely appeal.
DISCUSSION
The Men’s Wearhouse challenges the trial court’s refusal to
order arbitration of the portion of plaintiff’s PAGA claim that
seeks to recover his underpaid wages. As noted above, the
California courts currently disagree about a trial court’s
authority to order a portion of a PAGA claim to arbitration: One
case says this is permissible (Esparza, supra, 13 Cal.App.5th at
p. 1234), while most others have said it is not (Lawson, supra, 18
Cal.App.5th at p. 712; Williams v. Superior Court (2015) 237
Cal. App. 4th 642, 649 (Williams v. Superior Court); Betancourt v.
4
Prudential Overall Supply (2017) 9 Cal.App.5th 439, 448;
Tanguilig v. Bloomingdale’s, Inc. (2016) 5 Cal.App.5th 665, 677-
678 (Tanguilig); Perez v. U-Haul Co. of California (2016) 3
Cal.App.5th 408, 420-421 (Perez)). 2 Because the arbitrability of a
portion of a PAGA claim presents a legal question that lies at the
intersection of California labor law and arbitration law, our
review is de novo. (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th
853, 864 (Julian) [where denial of a motion to compel “relies on a
determination of law,” review is “de novo”].) We start with a brief
overview of these two areas of law, then apply them to the
question before us.
I. Pertinent Background Law
A. California labor law
1. Substantive protections
California labor law grants employees two protections
relevant to this appeal.
The law prohibits employers from requiring their
employees to work more than eight hours in a day, 40 hours in a
week or six days in a row at their regular hourly rate of pay (the
overtime rules). (§ 510, subd. (a).) These rules do not apply to
(and therefore exempt) “executive, administrative, and
professional employees.” (§ 515, subd. (a).) If an employer does
not comply with the overtime rules applicable to a non-exempt
employee, that employee is entitled to premium pay of 1.5 times
his regular hourly pay, and to twice his regular hourly pay if
2 The federal courts interpreting California law are no less
divided. (Compare Mandviwala v. Five Star Quality Care, Inc.
(9th Cir. 2018) 723 F. App’x. 415, 417-418 [PAGA claim may be
split] with Whitworth v. SolarCity Corp. (N.D. Cal. 2018) 336 F.
Supp. 3d 1119, 1124-1126 [PAGA claim may not be split].)
5
required to work more than 12 hours in a day or more than eight
hours on the seventh day in a row. (§ 510, subd. (a).) What is
more, the employer’s failure to compensate the employee at the
statutory premium pay rate means that the employee’s pay
checks are inaccurate and, if the employee quits or is fired, may
mean that he was willfully not paid the full amount of his unpaid
wages when he departed, each of which constitutes a separate
Labor Code violation with its own additional penalty. (§§ 226,
subds. (a)(1), (a)(2), (a)(5) & (a)(9), 203; see Maldonado v. Epsilon
Plastics, Inc. (2018) 22 Cal.App.5th 1308, 1331-1332 [willful
failure to pay overtime premiums violates law requiring timely
payment of full wages to departing employee].)
The law also requires that employers afford their
employees meal and rest periods during any shift longer than five
hours (for meal periods) and three and one-half hours (for rest
periods) (the meal and rest period rules). (§§ 226.7, subd. (b),
512, subd. (a); Cal. Code Regs., tit. 8, § 11070, subds. (11))(A) &
(12)(A) [mercantile industry].) These rules also do not apply to
“executive, administrative, and professional employees.” (§ 515,
subd. (a); Cal. Code Regs., tit. 8, § 11070, subd. (1)(A).) If an
employer does not comply with the meal and rest break rules
applicable to non-exempt employees, an employee is entitled to
an additional hour’s pay for each workday that a meal or rest
period was not offered. (§ 226.7, subd. (c).)
2. Enforcement mechanisms
a. Pre-PAGA mechanisms
Traditionally, the Labor Code provides several mechanisms
for three different actors to enforce the above described labor
laws.
6
First, the aggrieved employee may seek judicial or
administrative relief. In terms of judicial relief, the employee
may “file[] an ordinary civil action against the employer” for (1)
breach of contract (Reynolds v. Bement (2005) 36 Cal. 4th 1075,
1084 (Reynolds), abrogated on other grounds in Martinez v.
Combs (2010) 49 Cal. 4th 35), (2) restitution under the Unfair
Competition Law (Bus. & Prof. Code, § 17200 et seq.) (Cortez v.
Purolator Air Filtration Products Co. (2000) 23 Cal. 4th 163, 177-
178), or (3) violation of the Labor Code provision at issue if (and
only if) the Code authorizes individual employees to bring a claim
based on that provision (§§ 1194, subd. (a) [authorizing civil suit
to recover “unpaid balance” of overtime premium pay], 218
[authorizing civil suit to recover pay for missed meal and rest
periods and waiting time penalty]). No matter what the legal
theory advanced, the employee’s recovery is limited to the
damages owed, which includes the amounts of premium pay
prescribed by statute but excludes any statutorily prescribed civil
penalties over and above those amounts. (Murphy v. Kenneth
Cole Productions, Inc. (2007) 40 Cal. 4th 1094, 1109-1113, 1115
(Murphy) [overtime payment and meal and rest break pay
recoverable in civil suit]; Atempa v. Pedrazzani (2018) 27
Cal.App.5th 809, 827 (Atempa) [relief in civil action limited to
“‘“damages, reinstatement, and other appropriate relief but . . .
not . . . civil penalties” [citation]’”], italics in original; Villacres v.
ABM Industries Inc. (2010) 189 Cal. App. 4th 562, 578 [same].) In
terms of administrative relief, the employee may file a wage
claim with, and to be adjudicated before, the Labor
Commissioner. (§§ 98-98.8; Reynolds, at p. 1084.)
Second, the Labor Commissioner may initiate proceedings
against the employer. (§§ 1193.6 [authorizing suit for “unpaid
7
overtime compensation”], 1194.5 [authorizing suit for injunctive
relief], 217 [authorizing suit to recover penalties].) For violation
of the overtime and meal and rest period rules, section 558
specifies what the commissioner may recover—namely, (1)
underpaid wages, and (2) an additional $50 for the first violation
against each employee for each pay period, and $100 for any
subsequent violation against each employee for each pay period.
(§ 558, subd. (a).) Any “[w]ages recovered” under section 558 go
to the “affected employee” (§ 558, subd. (a)(3)); all the rest goes to
the Labor and Workforce Development Agency (the agency)
(§ 558, subd. (b); Iskanian, supra, 59 Cal.4th at p. 378). Only the
Labor Commissioner may directly sue under section 558;
individual employees may not. (Atempa, supra, 27 Cal.App.5th
at p. 826, fn. 13 [“section 588 . . . do[es] not provide for a private
right of action to recover the civil penalties authorized under
[that] statute[]”]; Robles v. Agreserves, Inc. (E.D. Cal. 2016) 158
F. Supp. 3d 952, 1006 [same].)
Third, the local prosecuting authority may prosecute the
employer because the violations of some provisions of the Labor
Code are designated as misdemeanors (e.g., §§ 215, 216, 218) or
infractions (e.g., § 226, subd. (c)).
b. PAGA
Recognizing that the enforcement authorities had
insufficient incentive and resources to sue employers for Labor
Code violations (Iskanian, supra, 59 Cal.4th at p. 379), our
Legislature enacted PAGA in 2003 to create a fourth mechanism
for enforcing California’s labor laws. As its full name suggests,
PAGA establishes a default penalty for all Labor Code violations
and, more significantly, declares individual, “aggrieved”
employees to be “private attorney[] general[s]” acting “as the
8
proxy or agent of the state’s labor law enforcement agencies” and,
in that capacity—and only in that capacity—authorizes them to
bring “civil action[s]” “on behalf of” themselves “and other current
or former employees.” (§ 2699, subds. (a) & (f); Arias v. Superior
Court (2009) 46 Cal. 4th 969, 980, 986 (Arias); Amalgamated
Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46
Cal. 4th 993, 1003; see also Iskanian, at p. 382 [noting that a
PAGA claim is “a type of qui tam action”].)
Nearly every contour of a PAGA claim flows from the
ineluctable premise that a PAGA action is “‘fundamentally a law
enforcement action designed to protect the public and not to
benefit private parties.’” (Arias, supra, 46 Cal.4th at p. 986.) The
employee may not file his or her PAGA claim for particular labor
law violations until first giving the agency the opportunity to
investigate and file the claim itself (§§ 2699, subd. (a), 2699.3
[setting forth procedures for notifying agency]; Williams v.
Superior Court (2017) 3 Cal.5th 531, 545-546 (Williams)) and, if
the agency elects not to get involved, the agency is nevertheless
legally bound by the outcome of the employee-prosecuted PAGA
claim (Arias, at pp. 985-986; Tanguilig, supra, 5 Cal.App.5th at p.
671). Just as an action by the agency would be on behalf of all
aggrieved employees, the individual PAGA plaintiff also
represents all other aggrieved employees. (Julian, supra, 17
Cal.App.5th at p. 866, fn. 6; Huff v. Securitas Security Services
USA, Inc. (2018) 23 Cal.App.5th 745, 750-751 (Huff) [PAGA
plaintiff has standing as long as any other employee is
“aggrieved,” even if he himself was not injured by all alleged
violations].) And PAGA splits the “civil penalties recovered” in a
way that favors the agency: 75 percent goes to the agency (to use
for enforcement, administration and education) and only 25
9
percent goes to the “aggrieved employees.” (§ 2699, subds. (i) &
(j).)
B. Arbitration law
Private parties, including employers and employees, may
generally agree by contract to resolve their disputes through
arbitration. (Rent-A-Center W., Inc. v. Jackson (2010) 561 U.S.
63, 67 [“arbitration is a matter of contract”].) Such contracts are
enforceable as a matter of federal law under the Federal
Arbitration Act (FAA). (9 U.S.C. § 2 [“A written provision in any
. . . contract evidencing a transaction involving commerce to
settle by arbitration a controversy thereafter arising out of such
contract or transaction . . . or an agreement in writing to submit
to arbitration an existing controversy arising out of such a
contract . . . shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation
of the contract.”]; AT&T Mobility LLC v. Concepcion (2011) 563
U.S. 333, 344 [“The ‘principle purpose’ of the FAA is to ‘ensur[e]
that private arbitration agreements are enforced according to
their terms.’ [Citation.]”]; Epic Systems Corp. v. Lewis (2018) 138
S. Ct. 1612, 1632 (Epic Systems) [“Congress has instructed that
arbitration agreements [between private employers and
employees] must be enforced as written.”].)
In Iskanian, supra, 59 Cal. 4th 348, our Supreme Court
carved out an exception to this general rule when it held that an
employee could not contractually agree to give up a potential
PAGA claim against his or her employer. (Id. at pp. 378-392.)
Iskanian first declared that such “PAGA waivers” were against
public policy because (1) they constitute an indirect agreement to
exempt the employer from violations of California’s labor laws,
and (2) private parties cannot agree to waive a “‘law established
10
for a public reason.’” (Id. at pp. 382-383.) Iskanian then
determined that the FAA did not preempt its “no waiver” rule
because the FAA is concerned with “ensur[ing] an efficient forum
for the resolution of private disputes, whereas a PAGA [claim] is
a dispute between an employer and the state Agency.” (Id. at p.
384; see also id. at pp. 386-387; see also Correia v. NB Baker
Electric, Inc. (Feb. 25, 2019, D073798) __ Cal.App.5th __ [19
D.A.R. 1455, 1455] [Epic Systems did not overturn Iskanian, as
only Iskanian deals with “a claim for civil penalties brought on
behalf of the government . . .”], italics in original.) The court
nevertheless recognized that an employee’s non-PAGA claims for
“individual damages” were private disputes and thus, under the
FAA, could be sent to arbitration if the employer and employee so
agreed. (Iskanian, at p. 391.)
II. Analysis
The trial court’s denial of the motion to compel arbitration
turns on whether an individual employee’s PAGA claim seeking
remedies available to the agency under section 558 may be split
into two claims based on the remedies sought—with the claim for
underpaid wages under section 558 being shunted to arbitration
while the claim for the further $50 and $100 per-pay-period
penalties under section 558 remaining in court. We conclude that
splitting a PAGA claim in this manner is both (1) legally
impermissible and (2) inconsistent with labor and arbitration
law.
A. Impermissible claim splitting
California follows the primary rights theory. This theory
provides that “‘one injury gives rise to only one claim for relief’”
(Boeken v. Philip Morris USA, Inc. (2010) 48 Cal. 4th 788, 798
(Boeken)), and accordingly prohibits a plaintiff from “‘divid[ing] a
11
primary right and enforc[ing] it in two suits’” whether in a
judicial or arbitral forum (Mycogen Corp. v. Monsanto Co. (2002)
28 Cal. 4th 888, 904; Mission Beverage Co. v. Pabst Brewing Co.,
LLC (2017) 15 Cal.App.5th 686, 708; Cal Sierra Development,
Inc. v. George Reed, Inc. (2017) 14 Cal.App.5th 663, 677-678 (Cal
Sierra)). A primary right is not defined by the legal theory
asserted (Cal Sierra, at pp. 677-678) or the remedy sought
(Crowley v. Katleman (1994) 8 Cal. 4th 666, 681 (Crowley); Hi-
Desert Medical Center v. Douglas (2015) 239 Cal. App. 4th 717,
734). Instead, a “primary right” is defined by “the plaintiff’s right
to be free from the particular injury suffered.” (Crowley, at p.
682.) As a general matter, “the same primary right” is at stake
“[w]hen two actions involving the same parties seek
compensation for the same harm.” (Boeken, at p. 798.)
Splitting a PAGA claim into two claims—a claim for
underpaid wages and a claim for the $50/$100 per-pay-period
penalties PAGA incorporates from section 558—runs afoul of the
primary rights doctrine because it impermissibly divides a single
primary right. That is because an individual employee bringing a
PAGA claim is vindicating one and only one “particular injury”—
namely, the injury to the public that the “state labor law
enforcement agencies” were created to safeguard. (Arias, supra,
46 Cal.4th at p. 986 [“In a lawsuit brought under [PAGA], the
employee plaintiff represents the same legal right and interest as
the state labor law enforcement agencies”]; Iskanian, supra, 59
Cal.4th at pp. 380, 387 [same].) The individual PAGA plaintiff’s
“personal claim” for underpaid wages, our Supreme Court has
noted, is “not at stake.” (Williams, supra, 3 Cal.5th at 547, fn. 4.)
Indeed, this is why the individual PAGA plaintiff and the other
aggrieved employees represented by that PAGA claim may still
12
bring separate individual claims for underpaid wages and why
any nonparty aggrieved employees are not bound by any adverse
PAGA judgment when pursuing those individual claims. (§ 2699,
subd. (g)(1) [“Nothing in [PAGA] shall operate to limit an
employee’s right to pursue or recover other remedies available
under state or federal law, either separately or concurrently with
an action taken under this part.”]; Arias, at pp. 985-987 [for
purposes of civil penalties, a PAGA judgment “is binding not only
on the named employee plaintiff but also on government agencies
and any aggrieved employee not a party to the proceeding,” but
where the employer prevails, nonparty employees are not bound
as to remedies other than civil penalties].) Because an individual
PAGA plaintiff is at all times acting on behalf of the agency when
seeking underpaid wages as well as the $50/$100 penalty, his
pursuit of both remedies “involv[es] the same parties seek[ing]
compensation for the same harm” and thus involves “the same
primary right.” (Boeken, supra, 48 Cal.4th at p. 798; cf. Caliber
Bodyworks, Inc. v. Superior Court (2005) 134 Cal. App. 4th 365,
377-384 [on demurrer, court may strike portions of PAGA claim
seeking additional penalties over and above underpaid wages
when the individual PAGA plaintiff has not first presented his
PAGA claim to the agency].)
Contrary to what The Men’s Wearhouse argues, our
conclusion is consistent with Broughton v. Cigna Healthplans
(1999) 21 Cal. 4th 1066 (Broughton) and Cruz v. PacifiCare
Health Systems, Inc. (2003) 30 Cal. 4th 303 (Cruz). Broughton
held that an individual plaintiff’s claim under the Consumer
Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.) could be
split into two and shunted into two different fora—namely, his
claim for damages sent to arbitration and his claim for injunctive
13
relief to “enjoin[][the defendant’s allegedly] deceptive [methods,
acts and] practices” to remain in court. (Boughton, at pp. 1079-
1084.) Following on Broughton’s heels, Cruz held that an
individual plaintiff’s claim under the Unfair Competition Law
(UCL) (Bus. & Prof. Code, § 17200 et seq.) could likewise be split
into two and shunted into two different fora—namely, his claim
for restitution to arbitration and his claim for injunctive relief to
“‘enjoin[] [the defendant’s allegedly] wrongful acts and practices’”
to remain in court. (Cruz, at pp. 308-309, 312-313, 315.)
Broughton and Cruz sanctioned the claim splitting because the
individual plaintiff’s CLRA and UCL claims, respectively,
involved two primary rights—namely, the individual plaintiff’s
right to be made whole (through damages or restitution) and the
public’s right to be protected from deceptive or wrongful practices
(through a “public injunction” sought by the individual plaintiff
“act[ing] in the purest sense as a private attorney general”).
(Cruz, at p. 312; Broughton, at pp. 1079-1080, 1084; see also
McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 961 [“the public
injunctive relief available under the UCL [and] the CLRA . . . is
primarily ‘for the benefit of the general public’ . . . [and] ‘not to
resolve a private dispute’”].) In other words, individual CLRA
and UCL plaintiffs sometimes wear two hats while the employee
who brings a solitary PAGA action always wears but one; the
former may accordingly be split while the latter may not.
B. Inconsistency with labor and arbitration law
Even if the primary rights doctrine did not categorically bar
a court from splitting a PAGA claim and sending the portion
seeking underpaid wages to arbitration, such a procedure cannot
be reconciled with labor law or arbitration law.
14
1. Labor law
There are three reasons why splitting an individual PAGA
claim into a claim for underpaid wages and a claim for “civil
penalties” cannot be squared with the labor law that PAGA is
designed to enforce.
First, PAGA awards the “aggrieved employee”-plaintiff a
single, indivisible civil penalty that is to be split between the
agency (which receives 75 percent) and the “aggrieved
employee[s]” (who receive 25 percent). (§ 2699, subds. (a) & (i).)
PAGA empowers the employee-plaintiff to “recover” the “civil
penalty” that would otherwise “be assessed and collected by the”
agency (§ 2699, subd. (i)), and section 558 defines what the “civil
penalty” is for violations of the overtime and meal and rest period
rules—namely, a per-pay-period penalty of $50 or $100 “in
addition to an amount sufficient to recover underpaid wages”
(§ 558, subds. (a)(1) & (a)(2)). (See Equilon Enterprises v.
Consumer Cause, Inc. (2002) 29 Cal. 4th 53, 59 [“plain meaning of
[a statute’s] actual words” controls].) PAGA then specifies that
this singular penalty is to be allocated as follows: 75 percent of
all “civil penalties recovered” (that is, 75 percent of both the
underpaid wages and $50/$100 additional penalties together) to
the agency, and the remaining 25 percent of those penalties to
the “aggrieved employees.” (§ 2699, subd. (i).) (Atempa, supra,
27 Cal.App.5th at pp. 828-829 [reaching same conclusion]; Moorer
v. Noble L.A. Events, Inc. (Feb. 11, 2019, B282631) __ Cal.App.5th
__ [19 D.A.R. 1665, 1667] (Moorer) [same]; accord, Iskanian, 59
Cal.4th at pp. 360, 388 [consistent with 75 percent of entire
penalty going to agency, remarking that “most of the proceeds of
[PAGA] litigation” would be “going to the state” and would
“largely go to state coffers”].) PAGA’s textually mandated
15
allocation of a single “civil penalty” between the agency and
aggrieved employees in a 75/25 percent split is inconsistent with
splitting a PAGA claim along the very different fault line
between underpaid wages and the additional per-pay-period
penalty.
The Men’s Wearhouse argues that there is no inconsistency
because (i) section 558 supersedes PAGA’s 75/25 percent
allocation rule, and (ii) section 558 creates two separate penalties
(namely, an underpaid wages penalty and a per-pay-period
penalty) rather than a single, indivisible penalty, and expressly
provides that the underpaid wages penalty “shall” be allocated to
“the affected employee[s]” (§ 558, subd. (a)(3)). We reject this
argument because both of its premises are invalid.
With regard to the first premise, PAGA’s allocation rule
trumps section 558’s. This result is dictated by the rules of
statutory construction. PAGA, as the later-enacted statute,
supersedes section 558 unless section 558 is the more specific
statute. (State Dept. of Public Health v. Superior Court (2015) 60
Cal. 4th 940, 960-961 (State Department); Stats. 2003, ch. 906, § 2,
p. 6629, eff. Jan. 1, 2004 [PAGA]; Stats. 1999, ch. 134, § 14, pp.
1826-1827 [section 558].) However, neither PAGA nor section
558 is more specific than the other because each statute deals
with its own distinct (and hence equally specific) subject: Section
558 sets the default “civil penalty” for certain Labor Code
violations and defines how to allocate the civil penalty recovered
when the agency is the plaintiff, while PAGA authorizes
aggrieved employees to bring suit as the agency’s proxy and
defines how to allocate the “civil penalty” recovered when that
employee is the plaintiff bringing a PAGA claim. This result is
also dictated by the structure of PAGA. PAGA borrows the
16
penalty amounts from the various Labor Code statutes that it
empowers an individual employee to vindicate on behalf of the
agency, but PAGA provides the overarching procedural rules that
govern such employee-prosecuted claims. (Accord, Amalgamated
Transit, supra, 46 Cal.4th at p. 1003 [characterizing PAGA as
“simply a procedural statute”].) If, as The Men’s Warehouse
implores, PAGA also incorporated the allocation rules from the
various Labor Code statutes, a single PAGA claim could be
governed by a patchwork of competing and conflicting allocation
rules. We prefer PAGA’s streamlined pattern to the crazy quilt
alternative.
With regard to the second premise, and as we explain
above, the text of section 558 defines a single “civil penalty.” (See
also Thurman v. Bayshore Transit Management, Inc. (2012) 203
Cal. App. 4th 1112, 1145 (Thurman) [section 558’s “civil penalty
. . . consists of both the $50 or $100 penalty amount and any
underpaid wages”].) That section 558 refers to the per-pay-period
penalties as being “in addition to” the underpaid wages does not
create two separate remedies; instead, it defines two components
of a singular “civil penalty” that is recoverable in a PAGA action.
Nor, as The Men’s Warehouse urges, does the per-pay-period
penalty somehow become a separate “penalty” distinct from
underpaid wages because the per-pay-period penalty is a fixed
amount or because it can be called a “civil penalty” rather than
“statutory [damages]”; a single civil penalty can be made up of
components that include fixed amounts (Murphy, supra, 40
Cal.4th at pp. 1112-1113) and the semantics of assigning labels to
the components of a statute’s penalty cannot trump the statute’s
textual creation of a single penalty (Iskanian, supra, 59 Cal.4th
at p. 388).
17
Second, a PAGA claim is, fundamentally, a representative
claim. As noted above, the “aggrieved employee” who brings a
PAGA claim is representing the agency and, while proceeding in
the agency’s stead, is also representing all of the other aggrieved
employees. (Julian, supra, 17 Cal.App.5th at p. 866, fn. 6; Huff,
supra, 23 Cal.App.5th 745, 750-751.) PAGA allocates 25 percent
of the civil penalties recovered to the “aggrieved employees” to
give individual employees an incentive to sue on the agency’s
behalf, not as a means of awarding “victim-specific relief.”
(Whitworth, supra, 336 F. Supp. 3d at p. 1126; Iskanian, supra,
59 Cal.4th at pp. 387-388.) Indeed, this distinction between “a
PAGA litigant’s status as ‘the proxy or agent’ of the state” rather
than as a private party “purs[uing] . . . victim-specific relief” is
the very reason Iskanian cited for declaring PAGA claims exempt
from arbitration. (Iskanian, at pp. 387-388; see also id. at p. 381
[“The civil penalties recovered on behalf of the state under the
PAGA are distinct from the statutory damages to which
employees may be entitled in their individual capacities.”].)
Breaking off the portion of a PAGA claim seeking underpaid
wages on the ground that those wages constitute “victim-specific
relief,” as The Men’s Wearhouse urges, ignores the representative
nature of a PAGA claim as well as one of the cornerstone
principles of Iskanian.
Third, an aggrieved employee’s choice to bring a solitary
PAGA claim is his choice to make. As noted above, an aggrieved
employee desiring to pursue judicial (rather than administrative)
relief for his employer’s violation of the overtime or meal and rest
period rules has the option of (1) filing a lawsuit asserting a claim
in his individual capacity (§§ 1194, 218) or (2) filing a lawsuit
asserting a PAGA claim (§ 2699). If he chooses the former, the
18
employee gets to keep all of his awarded underpaid wages, but
the claim is subject to arbitration if he has so agreed. (§§ 1194,
218; Iskanian, supra, 59 Cal.4th at p. 391.) If he chooses the
latter, the employee gets to recover underpaid wages and per-pay
period penalties for himself and his fellow employees in court
(rather than arbitration), but he is required to give 75 percent of
the total recovery to the agency and to split the remaining 25
percent with his fellow employees. (§§ 2699, subds. (a) & (i);
Iskanian, at pp. 378-392; Moorer, supra, __ Cal.App.5th __ [19
D.A.R. 1665, 1667].) Each has its pros and cons, but the choice of
which to pursue is ultimately the employee’s call. (Iskanian, at p.
383 [“employees are free to choose whether or not to bring PAGA
actions when they are aware of Labor Code violations.”]; id. at p.
387 [same].) Where, as here, the employee-plaintiff elected to file
a solitary PAGA claim, 3 splitting that claim into two effectively
rewrites his complaint into one asserting an individual claim for
underpaid wages (which is shunted to arbitration) and a PAGA
claim (which is not). This makes the employee’s choice
meaningless.
2. Arbitration law
Splitting an individual PAGA claim into a claim for
underpaid wages and a claim for “civil penalties” also cannot be
squared with the law governing arbitration. Iskanian held that
3 Although plaintiff initially alleged his entitlement to “all
underpaid wages recovered” under PAGA, that allegation does
not bear on his election to pursue a solitary PAGA claim because
he elected not to plead a separate claim for individual damages,
because his legally incorrect allegation is a nullity (Fundin v.
Chicago Pneumatic Tool Co. (1984) 152 Cal. App. 3d 951, 955), and
because he retracted that allegation in his appellate brief.
19
arbitration of a PAGA claim is “contrary to public policy” and
that contracts purporting to mandate arbitration of PAGA claims
are “unenforceable as a matter of . . . law.” (Iskanian, supra, 59
Cal.4th at pp. 360, 382-384.) Splitting a PAGA claim and
requiring the employee to arbitrate his entitlement to underpaid
wages, likely while the remainder of his PAGA claim is stayed
pending the arbitration (Civ. Proc. Code, § 1281.4 [mandating
stay “until an arbitration is had” when a portion of a lawsuit is
sent to arbitration]), eviscerates Iskanian’s mandate because it
sends the chief issue underlying a PAGA claim—that is, whether
the employer violated labor law (thereby entitling the employee
to underpaid wages)—to arbitration. It also offends Iskanian’s
reasons for barring arbitration because it effectively allows the
employee, by contract, to bind the agency to arbitration.
(Iskanian, at pp. 382-383.) Not surprisingly, other decisions have
refused to sanction the arbitration of the “individual” aspects of a
PAGA claim while leaving the “representative” aspects in court.
(E.g., Perez, supra, 3 Cal.App.5th at pp. 420-421 [“California law
prohibits the enforcement of an employment agreement provision
that requires an employee to individually arbitrate whether he or
she qualifies as an ‘aggrieved employee’ under PAGA”]; Williams
v. Superior Court, supra, 237 Cal.App.4th at pp. 644-646 [same].)
We join those decisions.
C. Esparza and Lawson
Our resolution of the question presented in this case puts
us at odds with Esparza and, to a lesser extent, with Lawson.
Esparza held that a PAGA claim may be split and the portion
seeking underpaid wages sent to arbitration because, in
Esparza’s words, the portion seeking underpaid wage “retain[s]
[its] private nature.” (Esparza, supra, 13 Cal.App.5th at p. 1246.)
20
As explained above, we reject the notion that any portion of a
PAGA claim is “private” because “the real party in interest” for a
PAGA claim is at all times “the government entity on whose
behalf the [employee-]plaintiff files suit.” (Iskanian, supra, 59
Cal.4th at p. 382.) Also, as explained above, we reject Esparza’s
subsidiary holding that section 558’s requirement that “all . . .
underpaid wages . . . go to the aggrieved employee” applies in a
solitary PAGA claim on the ground that section 558 is more
specific than PAGA. (Esparza, at p. 1243, fn. 4.) Lawson held
that a PAGA claim may not be split in order to send the portion
seeking underpaid wages to arbitration, but agreed with
Esparza’s subsidiary holding that the individual PAGA plaintiff
(and, presumably, his coworkers) are entitled to 100 percent of
the underpaid wages. (Lawson, supra, 18 Cal.App.5th at pp. 721,
724-725.) We agree with Lawson’s central holding but disagree
with its subsidiary holding regarding the allocation of the “civil
penalties” recovered.
******
In light of our conclusion that the trial court properly
denied the motion to compel arbitration, we have no occasion to
reach plaintiff’s proffered alternative grounds for affirmance—
namely, that the 2015 arbitration agreement did not require
arbitration of PAGA claims, that the 2006 arbitration agreement
applied, and that The Men’s Wearhouse waived the right to seek
arbitration by not filing its motion until Esparza was decided.
21
DISPOSITION
The order is affirmed. Plaintiff is entitled to his costs on
appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P.J.
ASHMANN-GERST
_________________________, J.
CHAVEZ
22