Private Attorneys General Act Review – 2025

The right to arbitration was found waived in Semprini, et al. v. Wedbush Securities Inc., 101 Cal.App.5th 518 (Cal. App. 4th Dist. Apr. 18, 2024). In 2015, Semprini filed a class action lawsuit against Wedbush Securities, Inc., alleging violations of the California Labor Code, including misclassification of employees as exempt, failure to pay minimum wage, overtime compensation, and failure to provide meal and rest periods. The plaintiff sought to maintain these claims on a class-wide basis. Semprini also brought claims under the PAGA) on behalf of himself and other employees and asserted individual claims under California’s FEHA. There was an arbitration agreement with Semprini committing employment disputes to arbitration, but it was silent as to the arbitrability of class and PAGA claims and did not contain a class action waiver. The parties stipulated the FEHA claims would proceed in arbitration and the other claims would remain in court. The Labor Code class claims were certified in 2017, and the parties litigated the class and PAGA claims in the trial court over the next several years, conducting extensive discovery, motion practice, and trial preparation. In 2022, the U.S. Supreme Court issued its decision in Viking River Cruises, Inc. v. Moriana, et al. , 596 U.S. 639 (2022), holding that, contrary to prior California Supreme Court authority, an employer may enforce an employee’s agreement to arbitrate individual PAGA claims. Subsequently, Wedbush asked its workforce to sign arbitration agreements, and two dozen class members, including Swain (a newly added named plaintiff), signed the agreements. Nine months after the Viking River decision and after continuing with litigation, Wedbush filed a motion to: (i) compel Semprini and Swain to arbitrate their individual PAGA claims; and (ii) compel to arbitration Swain and the 23 other class members who signed arbitration agreements. The trial court denied the motion, and the California Court of Appeal affirmed. The Court of Appeal found Wedbush waived its right to compel the individual PAGA claims to arbitration by waiting nine months after the Viking River decision to file its motion, and by litigating the case during that time. As to the motion to compel Swain and the 23 class members to arbitration, the Court of Appeal expressed concern with the manner in which the defendant obtained signed arbitration agreements during the pendency of a class action, as it failed to advise class members about the effect of the agreements on the litigation. It further expressed doubt that the arbitration agreements signed in 2022 could trump the 2015 stipulation. Regardless, the Court of Appeal held Wedbush waived its right to compel any class members to arbitration because it waited five months after the agreements were signed in 2022 to file its motion. A group of former employees in Fredeen, et al. v. California Cemetery & Funeral Services, LLC, 2024 Cal. App. Unpub. LEXIS 3583 (Cal. App. 2d Dist. June 11, 2024), filed an action asserting claims under the PAGA. The trial court denied the defendant’s motion to compel arbitration of the plaintiffs’ claims. On appeal, the California Court of Appeal affirmed the trial court’s ruling. The trial court found the arbitration agreement both procedurally and substantively unconscionable and that it could not sever the problematic terms, and thus found the agreement unenforceable. The defendant argued that the trial court erred in finding the agreement procedurally unconscionable, and disputed the trial court’s finding of substantive unconscionability, arguing it was based on speculation and not on the actual terms agreed upon. Additionally, the defendant asserted that the trial court should have severed the unconscionable terms and enforced the rest of the agreement. The Court of Appeal found that the exclusions clause in the agreement, which excluded from arbitration any claims brought “to enforce any non-competition or confidentiality agreement which may exist between the parties,” was substantively unconscionable because the agreement subjected employees to provisions that the California Legislature expressly outlawed. Id. at *13. The Court of Appeal also determined that the confidentiality clause was sufficiently restrictive to impair the plaintiffs’ ability to conduct informal discovery and investigate their respective claims. As a result, the Court of Appeal ruled that the confidentiality clause was one-sided in that it allowed the defendant to disclose the arbitration to virtually anyone involved with its business and the claim itself, while the plaintiffs could only disclose the proceeding to their legal counsel, their tax preparers, and anyone else that can compel the disclosure under the law. Id. at *14. Accordingly, the Court of Appeal opined that the confidentiality clause was substantively unconscionable. The Court of Appeal also held that the trial court did not abuse its discretion in declining to sever the offending provisions, as an employment arbitration agreement with more than one unconscionable provision is disfavored and “can be considered permeated by unconscionability if it ‘contains more than one unlawful provision.’” Id. at *18. For these reasons, the Court of Appeal affirmed the trial court’s ruling denying the defendant’s motion to compel arbitration. The plaintiffs in Baer, et al. v. Tesla Motors, Inc., 2024 U.S. Dist. LEXIS 136805 (N.D. Cal. Aug. 1, 2024), filed a putative class and PAGA action against Tesla alleging violations of the California Labor Code. Some of the plaintiffs had been directly employed by Tesla, and two plaintiffs had worked at Tesla through a staffing agency. After Tesla moved to compel arbitration, the plaintiffs made a number of arguments in opposition. The plaintiffs asserted first that the arbitration agreements were not enforceable because Elon Musk had never countersigned

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