Private Attorneys General Act Review – 2025

affirmed the trial court’s ruling. The plaintiff signed an arbitration agreement as a condition of her employment with the defendant, which required arbitration of all employment-related disputes, including PAGA claims, and included several contested clauses, including: (i) a cost-splitting provision in which each party would pay their own arbitration costs, including attorneys’ and expert witness fees; (ii) a class action waiver prohibiting class or representative actions; and (iii) the agreement barred arbitration awards to entities not a party to the arbitration. The trial court found the agreement had procedural unconscionability because it was a mandatory condition of employment. The trial court also determined the agreement’s cost-splitting requirement was unconscionable. The trial court further determined that the attorneys’ fee requirement contradicted the PAGA’s provision that allows a prevailing plaintiff to recover attorneys’ fees and the agreement’s prohibition against awarding penalties to non-parties conflicted with the PAGA’s mandate that 75% of penalties go to the LWDA. The Court of Appeal agreed with the trial court and affirmed that there was no error in finding the agreement unconscionable. The Court of Appeal considered whether the unconscionable terms could be severed from the agreement and found that severance would not be appropriate. The Court of Appeal determined that the agreement was “permeated with unconscionability,” with multiple unconscionable provisions. Id. at *9. The Court of Appeal concluded that severing specific terms would not address the systemic issues and would require extensive rewriting of the agreement. For these reasons, the Court of Appeal affirmed the trial court’s ruling denying the defendant’s motion to compel arbitration . The plaintiff in Sanchez, et al. v. MC Painting, 2024 Cal. App. Unpub. LEXIS 1259 (Cal. App. 4th Dist. Feb. 28, 2024), filed a PAGA claim against her former employer. The trial court denied the defendant’s motion to compel arbitration pursuant to Iskanian, et al. v. CLS Transportation Los Angeles, LLC 59 Cal.4th 348 (2014), which held that a worker’s right to pursue a representative PAGA action cannot be waived and that the rule is not preempted by the FAA. The Court of Appeal affirmed that ruling. Thereafter, the U.S. Supreme Court decided Viking River Cruises, Inc. v. Moriana, et al., 596 U.S. 639 (2022), holding that certain aspects of Iskanian were preempted by the FAA and the California Supreme Court granted review of the opinion pending its decision in Adolph, et al. v. Uber Technologies, Inc. 14 Cal.5th 1104 (2023). The instant action was then transferred to the California Court of Appeal with directions to vacate the original opinion and reconsider the matter in light of Adolph . The Court of Appeal thereafter reversed the trial court’s order to the extent it denied the defendant’s petition to compel arbitration of the plaintiff’s individual claims. The Court of Appeal noted that Viking River’s holding that the FAA preempts Iskanian to the extent that it prevents the parties from agreeing they will arbitrate individual PAGA claims, and the parties had an arbitration agreement with a severability clause reflecting a clear intent that severance, and thus unenforceability, shall be limited such that the arbitration agreement can be enforced “to the fullest extent permitted under law.” Id. at *8. By virtue of the severability clause, the parties’ agreement allowed for the arbitration of the plaintiff’s individual PAGA claim notwithstanding that his non- individual claims can neither be waived nor arbitrated. The Court of Appeal found that the arbitration agreement itself suggested that litigation of the non-individual claims should be stayed pending completion of the arbitration. The Court of Appeal therefore remanded the action with instructions for the trial court to enter a new order compelling arbitration of the plaintiff’s individual claims, and to consider the defendant’s request to stay the remaining non-individual claims. An employee filed a PAGA action in Esquivel, et al. v. Armstrong Garden Centers, Inc., 2024 Cal. App. Unpub. LEXIS 2839 (Cal. App. 2d Dist. May 7, 2024), seeking civil penalties for alleged Labor Code violations on behalf of himself and other employees. The defendant sought to compel arbitration based on an arbitration agreement the plaintiff signed at the commencement of his employment. The central issue was whether the plaintiff’s individual PAGA claims for civil penalties were subject to arbitration under the terms of the agreement. The plaintiff electronically signed an arbitration agreement as part of the onboarding process. The agreement covered disputes related to employment, including compensation, classification, and legal claims arising from employment. The defendant contended that the plaintiff’s individual PAGA claims fell within the scope of the arbitration agreement. The trial court denied the defendant’s motion to compel arbitration, finding that it failed to demonstrate that the plaintiff’s individual PAGA claims were covered by the arbitration agreement. The court stated that the language in the agreement excluded from arbitration representative actions for civil penalties under the PAGA. On appeal, the California Court of Appeal affirmed the trial court’s ruling. The defendant argued that the trial court erred in placing the burden on the defendant to prove the arbitration agreement covered the plaintiff’s claims, and that the plaintiff should have been required to prove his claims were outside the agreement’s scope. The Court of Appeal rejected that argument. It reasoned that as the moving party to compel arbitration, the defendant bore the burden of proving both the existence of an arbitration agreement and

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