California Hands Rare Win to Employers
An employee sued her employer under the Private Attorneys General Act (PAGA) for state labor violations she claims harmed her and other employees. She alleged wage and hour violations and sought civil penalties, including unpaid wages. The employer moved to compel the employee to individually arbitrate her claim and stay the civil action. After losing in the trial court, the employer appealed. The California Supreme Court held that private litigants cannot recover unpaid wages pursuant to the state law at all. Disapproving a litany of prior precedent, the court found a civil penalty issued under the applicable provision of the California Labor Code does not encompass an amount for unpaid wages. Consequently the amount for unpaid wages does not constitute a “civil penalty” under PAGA. This decision gives employers with enforceable arbitration agreements containing class action waivers a tool to avoid facing similar wage claims on a class and/or representative basis.