Using “headless” Private Attorneys General Act (PAGA) actions as a tool for plaintiffs to avoid arbitration of their individual PAGA claims has been significantly undermined with a recent California Court of Appeal decision. In Leeper v. Shipt, Inc. (B339670, December 31, 2024), the court rejected the plaintiff’s argument that her PAGA action couldn’t be compelled to arbitration because it didn’t allege an individual PAGA claim, holding that “every PAGA action necessarily includes an individual PAGA claim” and her individual PAGA claim must be compelled to arbitration.
“Headless” PAGA Cases After Adolph
In a significant win for employers relating to arbitration agreements, in 2022, the U.S. Supreme Court held in Viking River Cruises v. Moriana that an employee’s individual PAGA claims could be separated from their non-individual — or “representative” — PAGA claims and compelled to arbitration, and the non-individual/representative claims dismissed for lack of standing. The win was short-lived though, because in 2023, the California Supreme Court issued its decision in Adolph v. Uber, holding that when a PAGA plaintiff’s individual claims are compelled to arbitration, the plaintiff doesn’t lose standing to litigate their non-individual/representative claims in court.
With the law clear that employers could move to compel individual PAGA claims to arbitration, some PAGA plaintiffs attempted to avoid arbitration by filing PAGA actions that purported to include only representative claims, which wouldn’t be subject to arbitration — which is what happened in Leeper.
Leeper’s Attempt to Avoid Arbitration
Christina Leeper worked for Shipt, Inc. as an independent contractor providing shopping services. Leeper and Shipt entered into both an independent contractor agreement and an arbitration agreement that required both parties to resolve all claims and disputes through arbitration.
Leeper, then, sued Shipt, alleging that it misclassified her and other workers as independent contractors and, as a result, violated various California Labor Code provisions. Leeper’s complaint was styled as a “representative complaint” for relief under PAGA and alleged a single count for “non-individual” PAGA penalties. Leeper also alleged that her claims couldn’t be compelled to arbitration because she was asserting only non-individual claims on a representative basis.
Shipt attempted to compel arbitration of the individual component of Leeper’s PAGA action pursuant to the parties’ arbitration agreement, but the trial court denied the motion, finding that Leeper alleged only a representative PAGA claim and didn’t allege an individual claim that could be compelled to arbitration.
All PAGA Actions Contain an Individual Claim
On appeal, the court considered what a PAGA action entails under the law — specifically, whether a PAGA action necessarily includes both individual and representative claims.
The court examined the plain language of the law, which defines a PAGA action as “a civil action brought by an aggrieved employee on behalf of the employee and other current and former employees.” Focusing on the “unambiguous and ordinary meaning” of the word “and” as “conjunctive and not disjunctive,” the court concluded that the definition of a PAGA action includes “both an individual claim component (plaintiff’s action on behalf of the plaintiff himself or herself) and a representative component (plaintiff’s action on behalf of other aggrieved employees).”
Based on the PAGA’s plain language and legislative history, the court concluded that “every PAGA action necessarily includes an individual PAGA claim.” The court reversed the lower court’s decision and directed it to issue a new order compelling arbitration of Leeper’s individual PAGA claim and staying her representative PAGA claim pending the arbitration.
Arbitration Agreements and PAGA
This case is an important win for employers who utilize — or are considering utilizing — arbitration agreements because by limiting the ability of a PAGA plaintiff to avoid arbitration by claiming they are alleging only a “representative” PAGA claim and not an “individual” PAGA claim, it strengthens an employer’s ability to enforce arbitration agreements and compel arbitration.
Erika Barbara, Senior Employment Law Counsel, CalChamber
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