Daily Blast - September 13, 2019 - Lewis Brisbois Bisgaard & Smith LLP

Today, the California Supreme Court resolved a split of authority over whether an employer may compel arbitration of an employee’s Private Attorneys General Act (PAGA) claim requesting unpaid wages under Labor Code section 558. ZB, N.A. v. Superior Court (Sept. 12, 2019, S246711) __ Cal.5th __ (Lawson). To resolve that issue, the court first had to decide whether a plaintiff employee may seek unpaid wages in a PAGA action in the first place. She cannot: “unpaid wages are not recoverable as civil penalties under the PAGA.” (Slip opn., p. 21.)

Before the PAGA was enacted in 2003, section 558 gave the Labor Commissioner authority to issue overtime violation citations for “a civil penalty as follows: [¶] (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.” (Labor Code, § 558, subd. (a), italics added.)

Under the PAGA, an employee may seek civil penalties for Labor Code violations committed against her and other employees by bringing, on behalf of the state, a representative action against her employer. And under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), an employee’s pre-dispute agreement to arbitrate her claims is unenforceable to the extent it blocks the employee’s PAGA claim from proceeding; “employers cannot compel employees to waive their right to enforce the state’s interests when the PAGA has empowered employees to do so.” (Slip opn., p. 28.) “But for Iskanian to apply, the state must in fact have delegated enforcement of its interest to private citizens.” (Ibid.)

After a lengthy examination of the PAGA, Labor Code civil penalties, and section 558, the Lawson court concluded that the civil penalties a plaintiff may seek under section 558 through the PAGA do not include the “amount sufficient to recover underpaid wages.” (Labor Code, § 558, subd. (a).) “Although section 558 authorizes the Labor Commissioner to recover such an amount, this amount — understood in context — is not a civil penalty that a private citizen has authority to collect through the PAGA.” (Slip opn., p. 2.) Because the employer’s “motion to compel arbitration concerned relief that was not cognizable under the sole cause of action in [the employee’s] complaint,” the trial court should have denied the employer’s motion and the Supreme Court affirmed the Court of Appeal’s decision on that ground. (Id. at pp. 2, 29-30.)