Arbitration/Employment/Waiver/Public Policy: Second District, Div. 1, Holds That Employer’s Right To Arbitrate Some Claims Was Not Waived, Because The Employee Had Not Shown Prejudice, But That PAGA Claims Could Not Be Arbitrated

PAGA Claims Could Not Be Arbitrated Because PAGA Is For The Benefit Of The Public, Not Private Parties

     In Harvey v. Yellowpages.com, Case No. B239733 (2nd Dist. Div. 1 July 22, 2013) (Mallano, J., author of majority opinion) (unpublished), the Court considered whether the trial court properly denied an employer’s petition to compel arbitration of a dispute involving wage/hour and related claims.  The employee, Mr. Harvey, claimed his supervisor, Sly (yes, that was the supervisor’s name) had treated him unfairly, requiring him to clock in and out, even when Harvey was not allowed to take a lunch break, and that Harvey had been terminated ostensibly for lack of performance, but really because he was sick and disabled.  After being served with pleadings, the employer launched discovery and waited approximately four months to petition to arbitrate.  The trial court found the employer had waived its right to arbitrate, and claims under the Private Attorneys General Act of 2004 (PAGA) were not arbitrable.  The employer appealed.

     Justice Mallano concluded a four month delay in petitioning to arbitrate and launching limited discovery had not resulted in prejudice to the employee.  Thus, there was no waiver of the right to arbitrate.  However, Justice Mallano did agree PAGA claims, allowing penalties for violations of the Labor Code, could not be arbitrated, because PAGA “is in the nature of an enforcement action” intended to confer benefits on the public.  Accordingly, the order denying the petition to compel arbitration was reversed as to all causes of action, except for the cause of action under PAGA, which cause was stayed until the other causes were arbitrated.

     Justice Johnson concurred with Justice Mallano, whereas Justice Rothschild, agreeing with the trial judge, would have affirmed the order denying arbitration.  We await further word from the California Supreme Court on the arbitrability of PAGA claims. Iskanian v. CLS Transportation Los Angeles, LLC, S204032. (B235158; 206 Cal.App.4th 949; Los Angeles County Superior Court; BC356521.)   See my June 8, 2013 post on arbitrability of PAGA claims.