When Is An Agreement To Arbitrate A PAGA Claim Predispute Or Postdispute?
Let me begin with what I believe is the punchline of our next case: "[T]he classification of an agreement as 'predispute' or 'post dispute' must be made by reference to the point at which an individual employee acquires the status of the state's agent." Julian v. Glenair, Inc., B277064 (2/4 11/27/17) (Manella, Epstein, Willhite). What does that mean here, and why is it important? First, it matters, because predispute arbitration clauses have been found unenforceable as to representative PAGA claims. Second, this case looks closely at the distinction between predispute and post dispute clauses, a distinction that was somewhat confusing to apply in Julian.
Julian involves unusual facts. Employees other than the Julians brought a lawsuit, the Rojas action, that asserted Labor Code violations and a PAGA claim for civil penalties. The employer, Glenair, then served its employees with a proposed arbitration agreement, giving them an opportunity to opt out, informing them of the PAGA claims, and stating that it was governed by the Federal Arbitration Act. Malissa and Machele Julian took no steps to opt out.
A third amended complaint in the Rojas action was filed, asserting no PAGA claim. A fourth amended complaint identifying the Julian parties as respondents contained a PAGA claim, but was never filed. Later, the Julians initiated their underlying action against Glenair, including a single claim under PAGA for civil penalties on behalf of themselves and other non-exempt employees.
So now we have teed up the issue: as to the Julians, was the arbitration clause as to which they failed to opt out predispute or post dispute? By the time they failed to opt out of arbitration, the company had already informed its employees (whether the Julians understood the information is a separate matter) of the PAGA claims in the Rojas action. And the Rojas action brought representative PAGA claims. From Glenair's point of view, the arbitration provision was therefore post-dispute as to a PAGA claim, and should be enforced against class members who did not opt out. Glenair argued that the agreement obliged respondents to submit their PAGA claim to arbitration.
The Court of Appeal holds that "the predispute/postdispute boundary is crossed when the pertinent employee is authorized to commence a PAGA action as an agent of the state." Here, that boundary was not crossed before the employees met the statutory requirements for commencing a PAGA action, i.e., filing a notice with the Labor and Workforce Development Agency, and waiting the statutory period for a response. Here, the arbitration agreement was submitted to the Julians before they, individually, satisfied those statutory requirements. Therefore, as to the Julians, the arbitration agreement was pre-dispute, and unenforceable. The Julians here were the "pertinent employee[s]" for determining whether the predispute/post dispute boundary had been crossed.
COMMENT: How is the situation in Julian any different from in Iskanian, the California Supreme Court PAGA case? In Iskanian, the Supreme Court confronted a situation where a pre-dispute arbitration clause purported to foreclose a PAGA claim in a judicial forum, as well as in arbitration. Glenair, however, did not try to use the predispute clause to foreclose arbitration of the PAGA claim. Nevertheless, Julian holds that the pre-dispute clause cannot be used to foreclose the Julians from choosing a judicial forum.
What is to prevent many individual employees from filing separate PAGA lawsuits with similar claims against the same employee? The Court explains that since a PAGA claim is a representative action in which the state has an interest, judicial estoppel will protect the employer.
It seems safe to predict that employer efforts to compel arbitration of PAGA claims will continue to generate case law.
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