This Case Makes It Easier For Employers To Beat Back PAGA Lawsuits When Employee Loses Labor Code Claims In Arbitration -- The Legal Tool Is Issue Preclusion.
In Julian Rodriguez v. Lawrence Equipment, Inc., B325261 (2/3 pub. 11/8/24) (Bershon, Edmon, Egerton), the plaintiff, Julian Rodriguez, alleged wage-and-hour violations under California’s Labor Code and pursued civil penalties under the Private Attorneys General Act (PAGA). An arbitrator ruled in favor of Lawrence Equipment, finding Rodriguez failed to prove the alleged violations of the Labor Code. The trial court entered judgment on the arbitration award and dismissed Rodriguez’s class claims. When Rodriguez later pursued his PAGA claim, the trial court dismissed it, holding that issue preclusion barred Rodriguez from relitigating the violations already resolved in arbitration. The court found that his standing under PAGA—predicated on his status as an "aggrieved employee"—was invalid since the arbitrator determined no Labor Code violations occurred.
On appeal, Rodriguez argued that the arbitration findings should not preclude his PAGA claim. The appellate court rejected this, adopting the reasoning in Rocha v. U-Haul Co. that issue preclusion applies to PAGA claims when the same alleged violations were adjudicated in arbitration. The court concluded that Rodriguez lacked standing for his PAGA claim as he could not establish any Labor Code violations. The judgment dismissing Rodriguez’s PAGA claim was affirmed.
We previously blogged about the Rocha case on 3/7/23. At the same time that the Rodriguez court followed Rocha, it refused to follow Gavriiloglou, a case we previously blogged about on 9/25/22. In Gavriiloglou, the court held that the arbitrator’s findings on the plaintiff’s individual Labor Code claims did not preclude the plaintiff from asserting PAGA standing. The court reasoned that the individual claims were pursued in a personal capacity, while PAGA claims represent the state’s interest, treating these as fundamentally different capacities, resulting in different claims. The Rodriguez court did not follow Gavriiloglou, distinguishing it as a case relying on claim preclusion rather than issue preclusion.
COMMENT. The confusing law concerning PAGA standing may be stabilizing in the following respect: the individual employee who loses Labor Code claims in arbitration loses standing, by virtue of issue preclusion, to sue for PAGA violations. As a result of losing individual Labor Code violations, the employee ceases to be an aggrieved person with standing to bring the PAGA claims.
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