When a worker stands in the shoes of the State of California, prosecuting wage violations under the Labor Code Private Attorneys’ General Act (PAGA), that representative plaintiff cannot be forced into arbitration, because the State did not agree to arbitrate. See Iskanianv. CLS Transportation of Los Angeles, LLC, 59 Cal.4th 348 (2014).
In Lawson v. ZB, N.A., 18 Cal. App. 5th 705 (Cal. Ct. App. 4th Dist. Dec. 19, 2017, as modified Dec. 21, 2017), the Court of Appeal rejected the attempt by the defendant Bank to force a PAGA plaintiff into arbitration as to the PAGA penalty requiring restitution of underpaid wages, under Labor Code §558. On March 23, 2018, the California Supreme Court granted review. On August 29, 2018, Bryan Schwartz Law, P.C., on behalf of the California Employment Lawyers Association (CELA), submitted an amicus brief supporting affirmance of the Court of Appeal decision.
PAGA civil-enforcement claims invoking Labor Code §558 include both the default civil penalty plus the penalty concerning underpaid wages. Lawson created a split with Esparza v. KS Industries, 13 Cal.App.5th 1228 (5th Dist. Aug. 2, 2017), which held that Labor Code §558(a)’s reference to a penalty including “an amount sufficient to recover underpaid wages” created a “private dispute,” to which the Iskanian rule does not apply.
Bryan Schwartz Law, P.C.’s brief on CELA’s behalf demonstrates that Lawson was correctly decided, and Esparza was wrong, because all PAGA actions are representative actions, not individual actions. The amicus brief illuminates the breadth of the State’s police power, which cannot be limited by a mandatory, pre-dispute arbitration agreement with an individual worker. The language, legislative history, and purposes of PAGA and Labor Code §558 demonstrate the Legislature’s clear intent to permit PAGA plaintiffs to recover the full measure of relief that would be available to the State in a public enforcement action. Defendant ZB Bank’s contention that PAGA and Labor Code §558 would be preempted by the Federal Arbitration Act (FAA), 9 U.S.C. §§1, et seq., clearly contravenes the Supreme Court’s analysis in Iskanian and McGill v. Citibank, N.A.(2017) 2 Cal. 5th 945. The FAA does not strip the State of its enforcement authority, or strip employees of their non-waivable, substantive state law right to pursue vital workplace protections.
CELA is an organization of approximately 1400 California attorneys whose members primarily represent workers in a wide range of employment cases, including wage and hour actions and PAGA actions. CELA and its members have taken a leading role in protecting the rights of California workers, including by submitting amicus briefs and oral argument in such groundbreaking employment rights cases such as Iskanian, Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, Gentry v. Superior Court (2007) 42 Cal.4th 443, Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, and Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903. Bryan Schwartz Law, P.C. has been instrumental to CELA’s amicus briefing in a host of key California cases.
The California Supreme Court’s decision in Lawson will have widespread ramifications for California workers. If the State’s PAGA penalty provisions forcing restitution to victims of wage theft can be shunted to individual arbitration, it will deeply undermine PAGA’s goal to strengthen the State’s enforcement power against wage law violators who steal from workers and unfairly compete against law-abiding businesses.
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