Duane Morris Private Attorneys General Act Review – 2024

DISCLAIMER The material in this Review is of the nature of general commentary only. It is not meant as or offered as legal advice on any particular issue and should not be considered as such. The views expressed are solely those of the authors. In addition, the authors disclaim any and all liability to any person in respect of anything and of the consequences of anything done wholly or partly in reliance on the contents of this Review. This disclaimer is from the Declaration of Principles jointly adopted by the Committee of the American Bar Association and a Committee of Publishers and Associations.

CITATION FORMATS All citations in the Duane Morris Private Attorneys General Act Review are designed to facilitate research. If available, the preferred citation of the opinion included in the West bound volumes is used, such as Baysal, et al. v. Midvale Indemnity Co., 78 F.4th 976 (7th Cir. 2023). If the decision is not available in the preferred format, a Lexis cite from the electronic database is provided, such as Moehrl, et al. v. National Association of Realtors, 2023 U.S. Dist. LEXIS 53299 (N.D. Ill. Mar. 29, 2023). If a ruling is not available in one of these sources, the full case name and docket information is included, such as Yates, et al. v. Traeger Pellet Grills , Case No. 19-CV-723 (D. Utah Sept. 7, 2023). eBOOK HIGHLIGHTS The Review is available for use on a smartphone, laptop, tablet , or any personal electronic reader by using any eBook reader application. eBook reading allows users to quickly scroll, highlight important information, link directly to different sections of the Review, and bookmark pages for quick access at a later time. The eBook is designed for easy navigation and quick access to informative data. The eBook is available by scanning the below QR code:

Duane Morris Private Attorneys General Act Review – 2024

NOTE FROM THE EDITORS The PAGA creates a scheme to “deputize” private citizens - “aggrieved employees” - to sue their employers for violations of the California Labor Code on behalf of their co-workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorneys’ fees and costs in addition to the civil penalties. Over the past year, PAGA representative actions have exploded in California. For companies facing PAGA claims, rulings in 2023 ushered in a new period of workplace litigation in California. This Review offers an overview of the most significant trends and developments that shaped the PAGA landscape in 2023, as well as the key PAGA-related decisions on issues such as arbitration, preemption, manageability, and the interplay of PAGA and class and collective action theories of liability. We hope this book – manifesting the collective experience and expertise of our class action defense group – will assist our clients by identifying developing trends in the case law and offering practical approaches in dealing with class action litigation.

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Duane Morris Private Attorneys General Act Review – 2024

CONTRIBUTORS

Duane Morris Private Attorneys General Act Review – 2024

GLOSSARY AND KEY U.S. SUPREME COURT DECISIONS Adequacy Of Representation – Plaintiffs must show adequacy of representation per Rule 23(a)(4) to secure class certification. It requires representative plaintiffs and their counsel to be capable of fairly and adequately protecting the interests of the class. Amchem Products, Inc. v. Windsor, et al. , 521 U.S. 591 (1997) – Windsor is the U.S. Supreme Court decision that elucidated the requirements in Rule 23(b), insofar as common questions must predominate over any questions affecting only individual class members and class resolution must be superior to other methods for the adjudication of the claims. Ascertainability – Although not an explicit requirement of Rule 23, some courts hold that the members of a proposed class must by ascertainable by objective criteria. Comcast Corp. v. Behrend, et al. , 569 U.S. 27 (2013) – Comcast is the U.S. Supreme Court decision that interpreted Rule 23(b)(3) to require that, for questions of law or fact common to the class, the plaintiffs’ damages model must show damages are capable of resolution on a class-wide basis. Commonality – Plaintiffs must show commonality per Rule 23(a)(2) to secure class certification. This requires that common questions of law and fact exist as to the proposed class members. Class – A group of individuals that has suffered a similar loss or alleged illegal experience on whose behalf one or more representatives seek to bring suit. Class Action – The civil action brought by one or more plaintiffs in which they seek to sue on behalf of themselves and others not named in the suit but alleged to have suffered the same or similar harm. Class Certification – The judicial process in which a court reviews the submissions of the parties to determine whether the plaintiffs have met their burden of showing that class treatment is the most appropriate form of adjudication. In federal courts, the process is governed by Rule 23 of the Federal Rules of Civil Procedure. Collective Action – A type of representative proceeding governed by 29 U.S.C. § 216(b) where one or more plaintiffs seeks to bring suit on behalf of others who must affirmatively opt-in to join the litigation. It is applicable to claims under the Fair Labor Standards Act, the Age Discrimination in Employment Act, or the Equal Pay Act. Cy Pres Fund – In class action settlement agreements, this is the money set aside for distribution to a § 501(c) organization when class members do not return a settlement claim form and money is left over after distribution to the class. Epic Systems Inc. v. Lewis, et al. , 138 S. Ct. 1612 (2018) – Epic Systems is the U.S. Supreme Court decision holding that arbitration agreements requiring individual arbitration and waiving a litigant ’ s right to bring or participate in class actions are enforceable under the Federal Arbitration Act. Opt-Out Procedures – If a court certifies a class under Rule 23(b)(3), class members are bound by the court ’ s judgment unless they opt-out after receiving notice of the lawsuit. Numerosity – Plaintiffs must show that their proposed class is sufficiently numerous that adding each class member to the complaint would be impractical. This is a requirement for class certification imposed by Rule 23(a)(1). Ortiz, et al. v. Fibreboard Corp., 527 U.S. 815 (1999) – Ortiz is the U.S. Supreme Court ruling that

Duane Morris Private Attorneys General Act Review – 2024

interpreted Rule 23(b)(3) to require personal notice and an opportunity to opt-out of a class action where money damages are sought in a class action. Predominance – The Rule 23(b)(3) requirement that, to obtain class certification, the plaintiffs must show that common questions predominate over any questions affecting individual members. Rule 23 – This rule from the Federal Rules of Civil Procedure governs class actions in federal courts and requires that a party seeking class certification meet four requirements of section (a) and one of three requirements under section (b) of the rule. Rule 23(a) – It prescribes that a class meet four requirements for purposes of class certification, including numerosity, commonality, typicality, and adequacy of representation. Rule 23(b) – To secure class certification, a class must meet one of three requirements of Rule 23(b)(1), Rule 23(b)(2), or Rule 23(b)(3). Rule 23(b)(1) – A class action may be maintained if Rule 23(a) is satisfied and if prosecuting separate actions would create a risk of inconsistent or varying adjudications with respect to individual class members or adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests. Rule 23(b)(2) – A class action may be maintained if Rule 23(a) is satisfied and the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Rule 23(b)(3) – A class action may be maintained if Rule 23(a) is satisfied and questions of law or fact common to class members predominate over any questions affecting only individual members and a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. Superiority – The Rule 23(b)(3) requirement that a class action can be permitted only if class resolution is the superior method of adjudicating the claims. Typicality – The plaintiffs’ claims and defenses must be typical to those of proposed class members’ claims. This is required by Rule 23(a)(3). Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. 338 (2011) – Wal-Mart is the U.S. Supreme Court ruling that tightened the commonality requirement of Rule 23(a)(2) and held that judges must conduct a “rigorous analysis” to determine whether there is a “common” contention central to the validity of the claims that is “capable of class-wide resolution.”

Duane Morris Private Attorneys General Act Review – 2024

TABLE OF CONTENTS

Page California Private Attorneys General Act .................................................................... 1 I. The Explosion Of PAGA Notices....................................................................... 2 II. The PAGA As A Work-Around To Arbitration .................................................. 2 III. The Dagger Of Viking River ............................................................................... 3 IV. The California Supreme Court’s Adolph Decision On PAGA Standing ......... 3 V. Key Rulings In PAGA Actions In 2023 .............................................................. 5 1. Settlement Approval Issues ......................................................................... 5 VI. Notable California State Court PAGA Rulings ................................................. 6 1. Decisions Regarding PAGA And Arbitration .............................................. 6 2. Decisions Regarding PAGA And Class Certification............................... 10 VII. Other Notable California State Court PAGA Rulings ................................... 11 VIII. Notable California Federal Court Rulings ..................................................... 12 IX. California Supreme Court PAGA Decisions And The Proposed Measure To Repeal PAGA................................................................................ 15 Table Of 2023 PAGA Litigation Rulings...................................................................... 18

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Duane Morris Private Attorneys General Act Review – 2024

California Private Attorneys General Act Prior to 2022, actions under the California Private Attorneys General Act (PAGA), Cal. Lab. Code, § 2698, et seq., emerged as one of the most popular and most effective workarounds to workplace arbitration programs used by the plaintiffs’ bar. The PAGA creates a scheme to “deputize” private citizens - “aggrieved employees” - to sue their employers for violations of the California Labor Code on behalf of their co-workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorneys’ fees and costs in addition to the civil penalties. Over the past year, PAGA representative actions have exploded in California. In 2009, the California Supreme Court held in Arias, et al. v. Superior Court that PAGA actions need not satisfy class action requirements. In 2014, the California Supreme Court ruled in Iskanian, et al. v. CLS Transportation Los Angeles that the Federal Arbitration Act (FAA) does not preclude the California Legislature from deputizing employees to prosecute violations of the California Labor Code on behalf of the state and, therefore, does not preempt a state law that prohibits waiver of PAGA representative actions. Both rulings led to an increase in the number of PAGA claims, which generally grew year over year until 2022. In 2022, PAGA actions saw their first setback as a workaround to arbitration. In June 2022, the U.S. Supreme Court held in Viking River Cruises v. Moriana, et al., 142 S.Ct. 1906 (2022) that the FAA preempts California law to the extent it precludes a PAGA action from being divided into individual and non-individual components, and that individual PAGA claims are thus subject to arbitration. The U.S. Supreme Court ruled that once an employer compels an employee to arbitrate the employee’s individual PAGA claim, the representative, or non-individual, PAGA claim on behalf of other employees should be dismissed. The U.S. Supreme Court reasoned that, having been compelled to arbitrate his or her individual claim, the plaintiff no longer had standing to maintain a non-individual PAGA action in court. This was obviously a favorable ruling for employers, but Justice Sotomayor’s concurrence in Viking River complicated matters. She noted that, if the Supreme Court’s analysis of state law was wrong regarding a plaintiff’s lack of standing to maintain a non-individual PAGA action if the individual PAGA action was compelled to arbitration, then California state courts would have the last word. Taking Justice Sotomayor’s cue, the California Supreme Court took up this standing issue in Adolph v. Uber Technologies – and then issued its decision this past summer. It ruled that PAGA plaintiffs can first pursue individual claims in arbitration and then can pursue non-individual claims in court as long as they are aggrieved employees. If the plaintiff loses in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiff prevails or settles their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. For companies facing PAGA claims, Adolph has ushered in a new period of workplace litigation in California. This Review offers an overview of the most significant trends and developments that shaped the PAGA landscape in 2023, as well as the key PAGA-related decisions on issues such as arbitration, preemption, manageability, and the interplay of PAGA and class and collective action theories of liability.

Duane Morris Private Attorneys General Act Review – 2024

I. The Explosion Of PAGA Notices According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades. The number grew from 11 notices in 2006 to 1,743 in 2011, to 5,208 in 2016, and to 6,502 in 2021. From 2013 to 2014, employers saw the largest single year increase, from 1,605 notices in 2013 to 4,532 notices in 2014, an increase of 182%. Over the five-year period from 2017 to 2021, the number of notices grew from 4,985 in 2017, to 6,502 in 2021, an increase of 30%. In 2023, the notices topped 7,780.

The increase is a likely reaction to the growth of workplace arbitration, fueled by the availability of fee- shifting awards for attorneys’ fee. II. The PAGA As A Work-Around To Arbitration Although the proliferation of mandatory arbitration programs started as early as 1991 when the U.S. Supreme Court issued its ruling in Gilmer, et al. v. Interstate/Johnson Lane Corp ., 500 U.S. 20 (1991), the movement did not gain steam until 2011, when the U.S. Supreme Court decided AT&T Mobility LLC v. Concepcion, et al., 563 U.S. 333 (2011), and held that the FAA preempts state rules that stand “as an obstacle to the accomplishment of the FAA’s objectives,” and it did not peak until 2018 with the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis, et al ., 138 S. Ct. 1612 (2018), wherein the last hurdle to enforcement of class and collective action waivers was eliminated. As the adoption of arbitration programs gained popularity as a mechanism to contract around class and

Duane Morris Private Attorneys General Act Review – 2024

collective actions, the plaintiffs’ class action bar identified work-arounds. The California Supreme Court cemented the PAGA as the frontrunner for generated employment-related claims with its 2014 decision in Iskanian, et al. v. CLS Transportation Los Angeles , 59 Cal.4th 348 (Cal. 2014), which seemingly immunized the PAGA from arbitration programs. In Iskanian , the California Supreme Court held that “where an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” Id . at 384. Whereas the California Supreme Court acknowledged Concepcion , it nevertheless reasoned that the rule against PAGA representative action waivers did not frustrate the FAA’s objectives because, whereas the FAA aims to ensure an efficient forum for the resolution of private disputes, a PAGA action “is a dispute between an employer and the state Labor and Workforce Development Agency.” Id . The Iskanian ruling fueled the filing of PAGA notices in 2014 and thereafter, as it cleared the PAGA as a mechanism by which to maintain a representative action unhindered by agreements to arbitrate on an individual basis. The PAGA workaround suffered its first significant set-back in 2022 with the U.S. Supreme Court’s highly anticipated decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022), which addressed the arbitrability of PAGA claims. III. The Dagger Of Viking River In Viking River , the U.S. Supreme Court drove a dagger through the heart of this work-around by continuing its trend of enforcing the FAA over state efforts to avoid or flat-out prohibit arbitration. See, e.g., Cal. Lab. Code § 229 (“Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”). The U.S. Supreme Court confirmed that, whether judicial or legislative in nature, where the FAA is in play, it preempts efforts to enforce those state-based rules. In Viking River , the U.S. Supreme Court found a conflict between the FAA and the PAGA's procedural structure. It recognized that the PAGA contains a “built-in mechanism of claim joinder,” which permits “aggrieved employees” to use the Labor Code violations they personally suffer as a basis to join to the action any claims that could have been raised by the State in an enforcement proceeding. Id . at 1923. The Supreme Court held that, to the extent that Iskanian precludes division of PAGA actions into individual and non-individual claims, and thereby “prohibits parties from contracting around this joinder device,” the FAA preempts such a rule. Id . Importantly, however, after finding that the employer in Viking River should have been able to compel arbitration of plaintiff’s individual claim, the U.S. Supreme Court addressed “what the lower courts should have done with Moriana's non-individual claims.” Id . at 1925. It ruled that, once an individual claim has been committed to a separate proceeding, the employee is no different from a member of the general public, and the PAGA provides no mechanism for such person to maintain suit. As a result, the correct course was to dismiss the remaining claims. Id . As a result, the U.S. Supreme Court eviscerated perhaps the most popular work-around to workplace arbitration, thereby dealing a significant blow to the plaintiffs’ bar and its ability to pursue claims on a representative basis. IV. The California Supreme Court’s Adolph Decision On PAGA Standing In her concurrence in Viking River , Justice Sotomayor expressly opened the door to two potential solutions to the majority opinion. She suggested that, in its analysis of the parties’ contentions, the Supreme Court detailed “several important limitations on the preemptive effect of the [FAA],” meaning that “California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general.” Id . at 1925. First, she suggested that, if the majority was incorrect in its understanding that the plaintiff lacked “statutory standing” under the PAGA to litigate her

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“non-individual” claims separately, “California courts, in an appropriate case, will have the last word.” Second, and alternatively, Justice Sotomayor opined that “the California Legislature is free to modify the scope of statutory standing under the PAGA within state and federal constitutional limits.” Id . at 1925-26. On July 20, 2022, the California Supreme Court granted review in Adolph, et al. v. Uber Technologies, Inc ., on the question as to whether an aggrieved employee, who agreed to arbitrate claims under the PAGA that are “premised on Labor Code violations actually sustained by” the aggrieved employee, maintains standing to pursue “PAGA claims arising out of events involving other employees” in court or in any other forum agreed by the parties. In July 2023, the California Supreme Court issued its ruling in Adolph, et al. v. Uber , 14 Cal.5th 1104 (2023). It determined that, once a PAGA plaintiff’s individual claims are compelled to arbitration, the plaintiff retains standing to maintain non-individual, representative PAGA claims in court so long as they are an aggrieved employee. If the plaintiff loses in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiff prevails or settles their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. Erik Adolph, an Uber delivery driver, alleged that Uber misclassified him as an independent contractor. Although Adolph initially sought to maintain a class action, those efforts were thwarted by a class action waiver in his workplace arbitration agreement. Adolph then amended his complaint to allege PAGA claims. The trial court denied Uber’s motion to compel arbitration, and the California Court of Appeal affirmed on the basis of California’s prior rule that, under Iskanian v. CLS Transportation , 59 Cal. 4th 348 (2014), the PAGA claims could not be split into individual and non-individual parts and that a PAGA claim was non- arbitrable. In a unanimous decision, the California Supreme Court disagreed with the interpretation of PAGA standing in Viking River. The California Supreme Court held that, so long as an employee alleges they are aggrieved by a violation, they maintain standing under the PAGA. Thus, even after individual PAGA claims are compelled the arbitration, the plaintiff retains standing to pursue non-individual PAGA claims in court. As to litigation logistics, the Supreme Court clarified several things. First, even though individual PAGA claims may be pending in arbitration and non-individual PAGA claims pending in court, the claims all remain in one action, and the court action may be stayed pending completion of arbitration. Second, if the plaintiff loses in arbitration, at that juncture, the plaintiff no longer has standing to maintain non-individual PAGA claims. Third, if the plaintiff prevails in arbitration or settles their individual claims, they continue to possess standing to return to court to pursue non-individual PAGA claims on behalf of others. In the wake of Adolph , the stakes for employers in individual PAGA arbitrations are high. Employers facing PAGA claims should conduct an early assessment of the plaintiff’s individual claims and if unmeritorious aggressively defend the matter because a win in arbitration will extinguish the case in court as well. We also anticipate that PAGA plaintiffs may begin alleging their aggrieved employee status, yet disclaiming any individual relief, in order to bypass arbitration altogether. It remains to be seen if that pleading strategy will be condoned by California courts.

Duane Morris Private Attorneys General Act Review – 2024

Key Rulings In PAGA Actions In 2023 The significant decisions in 2023 can be grouped into several categories, discussed below. 1. Settlement Approval Issues In 2023, courts continued to show that they are apt to deny settlement approval where procedurally the settled claims do not align with the pleadings and the case theories stated in the operative complaint where PAGA claims are issue. Errors in briefing and mistakes made by counsel can also lead to the denial of a proposed class-wide settlement. In Kabasele, et al. v. Ulta Salon, Cosmetics & Fragrance, Inc., 2023 U.S. Dist. LEXIS 42655 (E.D. Cal. Mar. 14, 2023), the plaintiffs filed a class action alleging that the defendant violated various state wage & hour laws. The parties ultimately settled the matter and the plaintiffs filed a motion for preliminary settlement approval. During the preliminary approval hearing, it was revealed that there was an error in the initial briefing regarding the number of class members. Instead of the previously stated 118,000 class members, there were approximately 18,000 class members. The court initially reviewed the motion based on the incorrect number of class members and declined further oral arguments. The plaintiff's counsel estimated the maximum possible value of the class claims to be $26,379,927, with an additional $8,950,000 in PAGA penalties. However, the court found that these estimates lacked detailed explanations and relied on mostly conclusory figures. The court also stated that the gross settlement amount proposed was $1,500,000, which constituted only 4.2% of the estimated maximum recovery. Given the low percentages compared to typical settlements, the court expressed concerns that it needed more information to assess whether the proposed settlement was fair, reasonable, and adequate for preliminary approval purposes. For these reasons, the court denied the motion for preliminary settlement approval. The effect of a prior PAGA settlement also was at issue in LaCour, et al. v. Marshalls Of California, LLC , 2023 WL 5542622 (Cal. App. 2023). The plaintiff, a loss prevention specialist, filed a PAGA action against his former employer premised on the employer’s alleged failure to reimburse for uniforms. The employer sought to dismiss the PAGA claims on the grounds they were encompassed by a prior settlement in a PAGA action, and barred by res judicata . For res judicata to apply, the Court of Appeal asked two questions. First, had the prior plaintiff plead or could she have plead the same claims that LaCour now sought to pursue. Second, when the prior case was settled, was the plaintiff there acting in privity with LaCour. The Court of Appeal answered “no” to both questions. As to the first question, the prior case was a bag check case, and the prior plaintiff had only been deputized by the LWDA to pursue claims related to that issue. Thus, the prior plaintiff could not have plead the expense reimbursement claims that LaCour was pursuing. As to privity, the Court of Appeal held it would not be fair to bind LaCour to the result obtained in the prior case in which he had not participated. Any employer facing multiple PAGA actions likewise should be aware of the ruling in Accurso, et al. v. In- N-Out Burgers , 2023 WL 5543525 (Cal. App. 2023). The employer there was facing five PAGA actions. When the fifth filed case - the Accurso case - was headed to mediation, two plaintiffs from one of the earlier filed PAGA actions tried to coordinate global settlement discussions across all of the cases. Accurso refused and reached a settlement that excluded the other PAGA plaintiffs. Upon learning of the impending settlement, some of the other plaintiffs moved to intervene in Accurso’s action. They also asked that the trial court stay Accurso based on the doctrine of exclusive concurrent jurisdiction. The trial court denied the motions, but on appeal, the Court of Appeal reversed. Although it agreed the trial court properly denied mandatory intervention, the Court of Appeal found error in the denial of permissive intervention. As to mandatory intervention, the intervening plaintiffs had demonstrated they had a significantly protectable interest in Accurso because they, as deputized proxies of the LWDA had a public enforcement charge, and any settlement of a PAGA claim within the scope of their proxy authorization would impair that authority. However, they failed to establish that Accurso was not adequately protecting their interests, i.e ., that he was seeking to settle claims outside the scope of his LWDA notice. As to permissive intervention, the Court

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of Appeal opined that PAGA plaintiffs with overlapping claims may have something significant to add to the settlement approval process because they can point out deficiencies in the settlement that the parties thereto may not have incentive to identify. The Court of Appeal remanded the case with instructions to the trial court to reconsider the motion to intervene and stay request and further noted that the trial court has broad discretion to coordinate the actions and to speak with the judges in the other PAGA cases to determine the best way to proceed. As addressed in further detail below, on November 29, 2023, the California Supreme Court granted review in Accurso pending consideration and disposition of related issues in Turrieta v. Lyft , Inc ., Case No. S271721. VI. Notable California State Court PAGA Rulings 1. Decisions Regarding PAGA And Arbitration The California Court of Appeal applied Viking River to reach opposite outcomes in Westmoreland, et al. v. Kindercare Education LLC , 90 Cal.App.5th 967 (Cal. App. 2023), and Gentry, et al. v. Robert Half International, Inc ., 2023 Cal. App. Unpub. LEXIS 5886 (Cal. App. Oct. 3, 2023). The difference in outcomes was based on problematic language in savings or severability clauses in the arbitration agreements at issue in both appeals. In Westmoreland , the Court of Appeal considered the meaning of a savings clause and concluded it mandated the plaintiff’s class and PAGA claims to be litigated in court. The savings clause contained two sentences. The first sentence provided that, if “any provision” of the arbitration agreement was determined to be unenforceable, the unenforceable provision would be severed and the remainder of the agreement unaffected. 90 Cal.App.5th at 971. The second sentence — a poison pill provision — provided that, if the waiver of class and collective claims clause (waiver clause) was deemed unenforceable, then the entire agreement was invalid and any class, collective, or representative action claim “must be filed in court.” Id . at 972. The waiver clause stated that class, collective, and representative claims were waived. This was in part unenforceable because the plaintiff’s non-individual PAGA claims could not be waived as a matter of law. The question thus was which sentence of the savings clause — the first or the second — was triggered. The employer argued that the only way the second sentence, i.e ., the poison pill provision, would apply was if the entirety of the waiver clause, and not just a portion of it, was deemed unenforceable. The Court of Appeal disagreed. It explained that, at the time the agreement was signed in 2016, it was clear that class action waivers were enforceable and thus there could never be any scenario where the entire waiver class was unenforceable. Accordingly, the Court of Appeal interpreted the second sentence of the savings clause to mean that, if a portion of the waiver clause was deemed unenforceable, then the entire agreement was invalid and any class, collective, or representative action claim “must be filed in court.” Id . at 981. In other words, one unenforceable part of the waiver clause voided the entire agreement and thus all of the plaintiff’s claims — class action claims included — remained viable in court. The arbitration agreement in Gentry provided in a covered claims clause that “no court or arbitrator shall determine any of my rights or claims on a class, collective, or representative basis,” that the employee retained the right to “bring claims in arbitration for myself as an individual,” and that the employee would not “initiate or prosecute any lawsuit in any way related to any claim covered by this agreement.” 2023 Cal. App. Unpub. LEXIS 5886, at *7-8. A severability clause provided that “[i]f any provision of the [covered claims clause] was determined to be void or unenforceable, then this Agreement shall be of no force or effect, because the parties intended to create an agreement to arbitrate individual disputes only.” Id . at *8. The Court of Appeal interpreted the covered claims clause language to impermissibly waive Gentry’s right to bring non-individual PAGA claims in any forum. Because of that impermissible provision, the Court of Appeal applied the severability clause, which it viewed as a poison pill provision, to invalidate the entirety of the agreement to arbitrate.

Duane Morris Private Attorneys General Act Review – 2024

As Westmoreland and Gentry make clear, it is important for employers to review and update any problematic savings or severability clause language. In turn, employers should take the time and effort to review their arbitration agreements to ensure that individual PAGA claims can be compelled to arbitration and non-individual PAGA claims stayed post- Viking River and Adolph . One of the more key decisions to address arbitration in this context is the case of Galarsa, et al. v. Dolgen California, LLC, 88 Cal.App.5th 639 (Cal. App. Feb. 24, 2023) . The plaintiff filed a representative action against her former employer, Dolgen California, LLC (Dollar General) to recover civil penalties under the PAGA for Labor Code violations on behalf of herself and other employees. Id. at 643-44. Dollar General moved to compel the matter to arbitration, and maintained that plaintiff must individually arbitrate her wage and hour claims, either as a PAGA action or otherwise. Id. at 646. The trial court denied the motion. Id. at 646. It reasoned that an employee could not waive their right to bring a representative PAGA claim, and that a PAGA claim could not be split into arbitrable individual claims and non-arbitrable representative claims. Id. Dollar General appealed, but the Court of Appeal affirmed the trial court’s order. Id. Dollar General thereafter petitioned the California Supreme Court for review, but the petition was denied. Id. The Court of Appeal ruling was subsequently vacated by the U.S. Supreme Court when it granted Dollar General's petition for writ of certiorari and remanded the case for further consideration in light of its decision in Viking River Cruises, Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022). Id. On remand, the Court of Appeal reversed in part and affirmed in part its order denying Dollar General’s motion to compel arbitration. The Court of Appeal held that PAGA claims could be divided into two types – claims seeking to recover civil penalties due to a Labor Code violation suffered by the plaintiff (Type A claims) and claims seeking to recover civil penalties for Labor Code violations suffered by employees other than the plaintiff (Type B claims). Id. at 648-49. Consistent with the California Supreme Court’s ruling in Iskanian, et al. v. CLS Transportation Los Angeles, LLC 59 Cal.4th 348 (2014), the Court of Appeal concluded that the waiver of the right to bring a representative action (Type B claims) under the PAGA was invalid, thereby requiring severance from the arbitration agreement. Id. at 649-50. However, in keeping with the decision in Viking River , the Court of Appeal concluded that the plaintiff’s individual PAGA claims (Type A) could be compelled to arbitration under the enforceable language of the agreement requiring arbitration of disputes arising out of the employee’s own employment. Id. at 651. With respect to the PAGA representative claim, the plaintiff argued she had the right to continue to pursue that action in court, while Dollar General maintained that the claim should be dismissed. Id. at 652. The Court of Appeal agreed with the plaintiff. It found that a plaintiff does not lose their standing to pursue PAGA representative claim (Type B) in court, after their individual PAGA claim (Type A) is compelled to arbitration. Id. at 653. The Court of Appeal also briefly touched on California’s rule against splitting a cause of action, predicting that the California Supreme Court would agree that California law does not prohibit an aggrieved employee from pursuing Type B claims in court once the Type A claims are ordered to arbitration, stating “[t]he reason for this prediction is simple – it is the interpretation of PAGA that best effectuates the statute’s purpose, which is ‘to ensure effective code enforcement.’” Id. at 654. For these reasons, the Court of Appeal affirmed its order denying arbitration of the representative PAGA claim, and reversed as to the plaintiff’s individual PAGA claim. Id. at 655. In Nickson, et al. v. Shemran, Inc ., 90 Cal.App.5th 121 (Cal. App. 2023), the Court of Appeal applied Viking River to reverse an order denying an employer’s motion to compel arbitration. The arbitration agreement at issue provided for individual arbitration of employment disputes, but waived the plaintiff’s right to “make any claims . . . in a private attorney general capacity.” Id . at 127. The Court of Appeal concluded this language impermissibly waived only non-individual PAGA claims. Id . at 130. Fortunately, the agreement included a severability clause such that if any provision of the agreement was found unenforceable, the remainder of the agreement would not be affected. The Court of Appeal thus severed the unenforceable non-individual PAGA claim waiver and affirmed the trial court’s order that compelled the plaintiff’s individual PAGA claims to arbitration. As to the plaintiff’s non-individual PAGA claims, the Court of Appeal left it to the trial court’s discretion on remand to decide whether they should be stayed or contemporaneously litigated.

Duane Morris Private Attorneys General Act Review – 2024

The Court of Appeal’s decision in Gregg, et al. v. Uber Technologies, Inc ., 89 Cal.App.5th 786 (Cal. App. 2023), highlights the kind of language an employer might utilize in an arbitration agreement to ensure that individual PAGA claims are resolved in arbitration and non-individual PAGA claims are stayed in the interim. Gregg, an Uber driver, filed a PAGA action against Uber, alleging that he and others drivers were misclassified as independent contractors. Uber sought to compel Gregg’s individual PAGA claims to arbitration based on an arbitration provision in the Technology Services Agreement (TSA) that Gregg executed. Although the trial court denied the motion, the U.S. Supreme Court’s decision in Viking River (issued during pendency of the appeal) furnished the basis for the Court of Appeal’s reversal. The language of the arbitration clause proved critical. The TSA contained a waiver of the right “to bring a representative claim on behalf of others” and a severance clause whereby if “any provision of the PAGA Waiver is found to be unenforceable [then] any representative action brought under PAGA on behalf of others must be litigated in a civil court.” Id . at 795. Although Gregg argued the TSA effected a wholesale waiver of the right to bring any PAGA claims, and that both his individual and non-individual PAGA claims had to be litigated in court, the Court of Appeal explained that the TSA’s use of the phrase “on behalf of others” signified an intent to have the waiver apply only to the non-individual PAGA claims. Id . at 798. Thus, the Court of Appeal severed the unenforceable waiver language, and ordered Gregg’s individual PAGA claims to arbitration. It also stayed the non-individual PAGA claims because the arbitration provision expressly provided for such a stay. It provided, “[t]o the extent that there are any claims to be litigated in a civil court of competent jurisdiction because a civil court of competent jurisdiction determines that the PAGA Waiver is unenforceable with respect to those claims, the Parties agree that litigation of those claims shall be stayed pending the outcome of any individual claims in arbitration.” Id . at 799. Adding similar language to an arbitration agreement would certainly help secure a stay of non-individual PAGA claims pending individual arbitration and is a good practice. In Ahlmann, et al. v. Forwardline Financial, LLC , 2023 Cal. App. Unpub. LEXIS 4454 (Cal. App. July 31, 2023), the Court of Appeal considered whether individual PAGA claims should be compelled to arbitration where the arbitration agreement failed to include a severability clause or express reference to the FAA. The arbitration agreement at issue was mandatory for employees to sign. It provided that arbitration would be pursued “solely in an individual capacity, and not as a representative or class member in any purported class or representative proceeding” and that the arbitrator could not consolidate claims or preside over “any form of class or representative proceeding.” Id . at *1-2. The plaintiff argued that Viking River did not apply because the arbitration agreement nowhere referenced the FAA and instead indicated that arbitration would be “pursuant to the laws of the State of California.” Id . at *3-4. The Court of Appeal held that the latter language was in reference to the law that would apply in arbitration and did not foreclose the FAA’s application to the agreement . For the FAA to not apply, there needed to be language in the arbitration agreement making an intent to apply state law to the agreement “unmistakably clear.” Id . at *18. The plaintiff in Ahlmann further argued that, even if the FAA applied, unlike in Viking River , his arbitration agreement did not contain a severability clause. Thus, the presence of any unlawful clause in the agreement should void the agreement. The Court of Appeal held this did not matter because § 1599 of the California Civil Code supplied the severability language that was absent in the agreement. Section 1599 provides that a contract is void as to unlawful parts and valid as to the rest. Applying that code section, the Court of Appeal construed the phrase “representative proceeding” in the agreement to encompass only the plaintiff’s non-individual PAGA claims, and reversed the trial court’s order denying the employer’s motion to compel the individual PAGA claims to arbitration. Id . at *24. In Quintero, et al. v. Apria Healthcare LLC , 2023 Cal. App. Unpub. LEXIS 3902 (Cal. App. July 5, 2023), the plaintiff worked as a courier for a company called Spoke that contracted with Apria, a home respiratory services and equipment company. Apria also employed couriers, but used Spoke’s couriers as well. In connection with his employment with Spoke, the plaintiff signed an arbitration agreement. Apria was not a party nor mentioned in the agreement. In November 2020, the plaintiff filed a putative wage and hour class action, which he later amended to include PAGA claims against Apria. At the outset of the case, the trial court asked the parties if a motion to compel arbitration was contemplated. Apria advised the trial court that it was aware of the existence of an arbitration agreement between the plaintiff and Spoke, but it did not

Duane Morris Private Attorneys General Act Review – 2024

state its intent to file a motion to compel arbitration. Apria proceeded to answer the complaint without raising arbitration as an affirmative defense. The plaintiff then moved for judgment on the pleadings as to particular affirmative defenses, with Apria stating its position that it was not the plaintiff’s employer and that it planned to file cross complaints against third parties who employed the plaintiff and other putative class members. In May 2021, after discovery in the case, the plaintiff filed a motion for class certification and a dispositive motion, which Apria opposed. During discovery, Apria obtained a copy of the arbitration agreement and an admission from the plaintiff that he signed it. The trial court granted class certification over Apria’s argument that some class members were subject to arbitration agreements. In June 2021, Apria, still not in possession of any copy of the arbitration agreement between the plaintiff and Spoke, demanded that the plaintiff submit his claims to arbitration. Just after class certification was granted, in September 2021, Apria filed a motion to compel arbitration arguing that the claims were intertwined with the plaintiff’s employment with Spoke and that the arbitration agreement therefore had to apply to Apria. The plaintiff asserted the right to arbitration was waived, and that his attorneys had expended substantial time in litigation on issues that would not have been necessary had the arbitration issue been raised earlier. The trial court denied the motion to compel because the right to arbitration was waived. On appeal, the Court of Appeal affirmed. As the Court of Appeal made clear, Apria’s counsel made numerous critical mistakes. First, it did not assert arbitration as an affirmative defense in its answer. Second, it did not seek a stay of collateral case issues in order to first fully vet the arbitration issue. Third, even after receiving a copy of the arbitration agreement and an admission that the plaintiff signed the agreement, Apria waited for months until after the class certification briefing and decision to file its motion to compel arbitration. The Quintero case highlights the importance, especially in cases of potential joint employer liability, of making the arbitration issue a priority at the case’s outset. If one employer entity has an arbitration agreement with the plaintiff, the defendant’s priority should be to obtain a copy of the agreement immediately, to assess its application to the case, and to move to compel arbitration at the earliest possible juncture. In Alberto, et al. v. Cambrian Homecare , 2023 Cal. App. Unpub. LEXIS 2223 (Cal. App. April 19, 2023), in connection with her hire, the plaintiff signed an arbitration agreement and a confidentiality agreement that required her to maintain the confidentiality of employee compensation information. If she failed to do so, the confidentiality agreement provided that the employer was entitled to seek injunctive relief in court and that the prevailing party would be entitled to attorneys’ fees. When the plaintiff filed a wage and hour class action, her employer sought to compel arbitration and to enforce the arbitration agreement’s class action waiver. Unfortunately, the employer neglected to itself sign the arbitration agreement, and the trial court found this problematic, concluding no agreement had been formed. Alternatively, the trial court deemed the arbitration agreement a contract of adhesion with some procedural unconscionability, and found the confidentiality agreement was substantively unconscionable because it permitted the employer to obtain an injunction in court without posting a bond or showing irreparable harm, and also because it restricted the plaintiff’s ability to discuss compensation. Additionally, a wholesale waiver of the PAGA claims contained in the arbitration agreement was also unconscionable. Because the two agreements were seen as part of the same transaction, the trial court deemed them a single contract permeated by unconscionable terms. On appeal, the Court of Appeal affirmed, but elected not to opine on whether the employer’s failure to sign the arbitration agreement was material. Instead, the Court of Appeal agreed with the trial court’s assessment that the agreement, together with the confidentiality agreement, was permeated with unconscionable terms. Although the employer argued that the confidentiality agreement was irrelevant and should not be considered in assessing the enforceability of the separate arbitration agreement, the Court of Appeal disagreed. It cited the general rule that papers related to the same subject matter and executed at the same time are to be construed together as one contract. Finally, in Decker, et al. v. Postmates, Inc., 2023 Cal. App. Unpub. LEXIS 5610 (Cal. App. Sept. 25, 2023), the defendant an online delivery service, operated a platform connecting consumers with local merchants and couriers. The plaintiffs were couriers, and alleged that the defendant misclassified them as independent contractors in violation of the California Labor Code and the PAGA. As part of their agreement

Duane Morris Private Attorneys General Act Review – 2024

with the defendant, the plaintiffs were required to accept the terms of the defendant’s Fleet Agreement, a 15-page document outlining various terms and conditions, including an arbitration provision and a representative action waiver for PAGA claims. The defendant moved to compel arbitration. The trial court denied the motion to compel arbitration, finding that the PAGA waiver was unenforceable. However, the trial court stayed the action pending the U.S. Supreme Court’s ruling in Viking River , and the California Supreme Court’s ruling in Adolph . On appeal, the California Court of Appeal remanded the action to the trial court in order to grant the defendant’s motion to compel arbitration. In Viking River , the Supreme Court clarified that individual PAGA claims must be compelled to arbitration under the Federal Arbitration Act (FAA), but the FAA does not preempt the unenforceability of contractual waivers for representative PAGA claims. The California Supreme Court's Adolph decision confirmed that a plaintiff retains standing to pursue non-individual PAGA claims in court even after individual claims are compelled to arbitration. The Court of Appeal acknowledged that both the U.S. Supreme Court and the California Supreme Court resolved the issues that existed when the appeal was filed. With the legal landscape clarified, the defendant argued that the plaintiff’s non-individual PAGA claims should be stayed pending individual arbitration. The plaintiff contended that a stay was not warranted. The Court of Appeal agreed with the defendant, and thereby remanded the action to the trial court to exercise its discretion in light of Adolph , considering the interest of judicial efficiency and the absence of overlapping issues in settled arbitrations. 2. Decisions Regarding PAGA And Class Certification California courts, however, in appropriate circumstances will deny class certification based on lack of class-wide proof or problems with the plaintiff’s own claims, which may also impact related PAGA representative claims. In Cessna, et al. v. Southern California Edison Co., 2023 Cal. App. Unpub. LEXIS 293 (Cal. App. 2d Dist. Jan. 17, 2023) the plaintiff, a senior power plant planner, filed a class action against his employer, Southern California Edison (SCE) seeking damages for California Labor Code violations for allegedly misclassifying him and others similarly-situated as exempt employees. Id. at *1. The plaintiff also sought civil penalties under PAGA. Id. Following discovery, the plaintiff filed a motion for class certification, which included multiple declarations from other planners characterizing their work as largely routine, standardized, and requiring little independent judgment and discretion, such that their job duties could not qualify as exempt under the Labor Code. Id. at *4. In opposition, SCE submitted its own supporting declarations from senior planners directly refuting plaintiff’s declarations, and emphasizing that the work of each planner varied significantly, particularly between district offices and assigned geographic locations. Id. at *5-6. The trial court ultimately denied the plaintiff’s motion, finding that individualized issues - namely, how planners spend their time from day-to-day - predominated over the central question of whether the planners were exempt employees. Id. at *7. The plaintiff thereafter moved to proceed with his PAGA claim on behalf of all senior planners, which the trial court also denied. Id. at *8. The trial court determined that the PAGA claim would be unmanageable, since it would necessitate multiple individualized inquiries into the senior planners’ workdays and activities in order to determine liability against SCE. Id. at *9. The plaintiff appealed both decisions, but was unsuccessful. The Court of Appeal affirmed the trial court’s rulings, and noted that the evidence presented by both parties showed significant variations in the job duties and responsibilities of planners, making it too difficult to determine whether they were properly categorized as exempt employees on a class-wide or representative basis. Id. at *14. Therefore, Court of Appeal ruled that the plaintiff could not proceed with his claims on a class-wide or representative basis under the PAGA. Id. at *19-20. The plaintiff in Woodworth, et al. v. Loma Linda University Medical Center, 93 Cal. App. 5th 1038 (Cal. App. July 24, 2023), a registered nurse, filed a class action and PAGA claim alleging that her employer, Loma Linda University Medical Center, violated various provisions of the California Labor Code. Following years of litigation, only the plaintiff’s individual claim for failure to provide rest periods remained. Id. at 1045. The trial court had granted four motions for summary judgement in favor of the medical center, denied the plaintiff’s motion for class certification of multiple classes, and denied her motion to strike

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