wage and hour claim, which was brought under the provisions of the Private Attorneys
General Act (the PAGA), Labor Code2 section 2698 et seq. The fact Lawson's PAGA
claim, of necessity, included not only Labor Code violations committed with respect to
her employment, but violations with respect to other employees, and that the arbitration
ordered by the trial court included those violations, does not alter the fact the trial court
ordered that Lawson's claim be arbitrated. Hence, we have no appellate jurisdiction over
the trial court's order compelling arbitration.
1 All references to ZB include defendant and appellant Zions Bancorporation.
2 All further statutory references are to the Labor Code, unless otherwise indicated. 2
However, apparently recognizing the potential defect in its appeal, shortly after
ZB filed its notice of appeal, ZB filed a petition for a writ of mandate challenging the trial
court's order. We thereafter ordered that the appeal and petition be considered together
and issued an order to show cause. By separate order we have now consolidated the
appeal and the writ proceeding and reach the merits of ZB's contentions with respect to
the trial court's order in our disposition of ZB's petition for extraordinary relief.
In our disposition on the merits, we find the trial court erred in bifurcating the
underpaid wages portion of Lawson's PAGA claim and ordering arbitration of that
portion of the claim. Accordingly, we issue a writ directing the trial court to vacate its
order bifurcating and compelling arbitration of the underpaid wages portion of Lawson's
PAGA claim.
FACTUAL AND PROCEDURAL BACKGROUND
According to the allegations of her complaint Lawson began working for
California Bank & Trust (CBT) as an hourly employee in 2013. CBT is a wholly owned
subsidiary of ZB. In February 2016, Lawson filed a complaint against CBT and ZB, in
which she alleged that CBT and ZB violated a host of labor laws and regulations
including required: overtime compensation, meal and rest periods, minimum wages,
payment upon discharge or resignation, timely wage payments, accurate age statements,
payroll records, and reimbursement for work-related expenses. Lawson alleged she was
acting as a representative under PAGA and was entitled to recover from the defendant the
3
penalties imposed under section 558 subdivisions (a)(1) and (a)(2), including in particular
underpaid wages owed to her and other CBT employees.3
In response to Lawson's complaint, and relying on an arbitration provision in her
employment agreement, ZB filed a motion to compel Lawson to arbitrate the underpaid
wages she asserted she, as an individual, was owed. ZB noted that Lawson had waived
the right to bring either a class action or representative action against it. ZB argued that
3 Section 558 provides: "(a) Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty as follows: "(1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. "(2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. "(3) Wages recovered pursuant to this section shall be paid to the affected employee. "(b) If upon inspection or investigation the Labor Commissioner determines that a person had paid or caused to be paid a wage for overtime work in violation of any provision of this chapter, any provision regulating hours and days of work in any order of the Industrial Welfare Commission, or any applicable local overtime law, the Labor Commissioner may issue a citation. The procedures for issuing, contesting, and enforcing judgments for citations or civil penalties issued by the Labor Commissioner for a violation of this chapter shall be the same as those set out in Section 1197.1. "(c) In a jurisdiction where a local entity has the legal authority to issue a citation against an employer for a violation of any applicable local overtime law, the Labor Commissioner, pursuant to a request from the local entity, may issue a citation against an employer for a violation of any applicable local overtime law if the local entity has not cited the employer for the same violation. If the Labor Commissioner issues a citation, the local entity shall not cite the employer for the same violation." "(d) The civil penalties provided for in this section are in addition to any other civil or criminal penalty provided by law. "(e) This section does not change the applicability of local overtime wage laws to any entity." 4
in light of that waiver, in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348, 387–388 (Iskanian), our Supreme Court prevented her from asserting lost
wage claims on behalf of other CBT employees. ZB did not ask the trial court to order
arbitration of the specific $50 and $100 amounts set forth in section 558 subdivisions
(a)(1) and (a)(2), as part of the civil penalties the statute imposes for violations of the
Labor Code and orders of the Industrial Welfare Commission. The trial court granted
ZB's motion. The trial court bifurcated Lawson's underpaid wage claims from her claim
to the specific $50 and $100 amounts imposed by section 558. However, because
Lawson was acting as a PAGA representative, the trial court ordered that the underpaid
wage portion of her claim would be arbitrated as a representative claim. The trial court's
order states in pertinent part: "[T]he Court bifurcates this issue of unpaid wages and
premium wages per California Labor Code section 558 against Defendants and compels
that issue to arbitration. This is a representative action. PAGA, by its very nature, is a
representative statute. Therefore, the court sends the claim under Labor Code Section
558 to arbitration as a representative action."
ZB filed a timely notice of appeal, as well as a petition for a writ of mandate.
DISCUSSION
ZB's Appeal
I.
Code of Civil Procedure section 1294 provides in pertinent part: "An aggrieved
party may appeal from: (a) An order dismissing or denying a petition to compel
arbitration." (Italics added.) The right to appeal is solely statutory and no statute permits
5
an appeal from an order compelling arbitration. (Porter v. United Services Automobile
v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 648–649; Gordon v. G.R.O.U.P.,
Inc. (1996) 49 Cal.App.4th 998, 1004, fn. 8. [no appeal from order granting
arbitration].)4
We of course agree that when an order delays or otherwise interferes with
arbitration, it is the functional equivalent of an order denying arbitration and appealable
under section 1294, subdivision (a). (See Sanders v. Kinko (2002) 99 Cal.App.4th 1106,
1109-1110; Porter, supra, 90 Cal.App.4th at p. 840; Henry v. Alcove Investment, Inc.
(1991) 233 Cal.App.3d 94, 99.) Here, admittedly, the scope of the arbitration ordered by
the trial court is broader than ZB requested and arguably frustrated the purposes of
arbitration. (See AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 346
(Concepcion).) Nonetheless, we are not willing to agree that an order, which on its face
compels arbitration, albeit an arbitration which is so broad that it may undermine the
benefits usually provided by arbitral forums, may be treated as an order which, as a
practical matter, denies arbitration.
4 The rationale for this disparate treatment of orders denying motions to compel and orders granting such motions is fairly straightforward: the utility and efficiency of arbitration would be entirely lost if a litigant attempting to enforce an arbitration provision were required to litigate a claim on the merits in a judicial forum before challenging an improper order denying a motion to compel; conversely if, in general, orders compelling arbitration were appealable, the prompt resolution of claims by way of arbitration would be substantially undermined. (Wheeler v. St. Joseph Hospital (1976) 63 Cal.App.3d 345, 353 (Wheeler).) 6
Our unwillingness to find appellate jurisdiction here is, in some measure, informed
by ZB's petition for a writ of mandate by which it raises the same arguments on the
merits it asserts on appeal and our conclusion those issues are the appropriate subject of
writ review. "California courts had held that writ review of orders compelling arbitration
is proper in at least two circumstances: (1) if the matters ordered arbitrated fall clearly
outside the scope of the arbitration agreement or (2) if the arbitration would appear to be
unduly time consuming or expensive. [Citations.]" (Zembsch v. Superior Court (2006)
146 Cal.App.4th 153, 160; see also Wheeler, supra, 63 Cal.App.3d at p. 353.) As we
discuss more fully below, in bringing her PAGA claim Lawson was acting on behalf of
the state and the state has not agreed to arbitrate its claim. Hence, it is clear Lawson's
claim is outside the scope of the arbitration agreement she signed and that writ relief is
appropriate. In considering whether extraordinary relief is appropriate, we must
recognize also the express public interest, which we discuss more fully below, embraced
in the PAGA and the consequent public interest in assuring that PAGA claims are
enforced under the circumstances contemplated by the Legislature. (See Babb v.
Superior Court (1971) 3 Cal.3d 841, 851.)
II.
A. PAGA
The court summarized the Legislature's enactment of PAGA in Arias v. Superior
Court (2009) 46 Cal.4th 969, 980–981 (Arias): "In September 2003, the Legislature
enacted the Labor Code Private Attorneys General Act of 2004 [citations]. The
Legislature declared that adequate financing of labor law enforcement was necessary to
7
achieve maximum compliance with state labor laws, that staffing levels for labor law
enforcement agencies had declined and were unlikely to keep pace with the future growth
of the labor market, and that it was therefore in the public interest to allow aggrieved
employees, acting as private attorneys general, to recover civil penalties for Labor Code
violations, with the understanding that labor law enforcement agencies were to retain
Recently, the court in Lopez v. Friant (2017) 15 Cal.App.5th 773, 780 (Lopez)
consistent with the principles discussed in Iskanian, distinguished between the statutory
damages individual employees may directly recover from employers under section 226
subdivision (e) for failure to provide an accurate pay stub as required by section 226
subdivision (a), and the civil penalties the Labor Commissioner and PAGA plaintiffs may
separately recover for such conduct under section 226 subdivision (b). The court found
17
that the scienter required for recovery under section 226 subdivision (e) does not apply to
the separate relief provided to the Labor Commissioner under section 226 subdivision
(b); hence, the court held that scienter requirement has no application in a PAGA claim
for violation of section 226 subdivision (a). (Lopez, at pp. 781-785.)
E. Analysis
1. Section 558 Claims are PAGA Claims
Section 2699 subdivision (a) provides: "Notwithstanding any other provision of
law, any provision of this code that provides for a civil penalty to be assessed and
collected by the Labor and Workforce Development Agency or any of its departments,
divisions, commissions, boards, agencies, or employees, for a violation of this code, may,
as an alternative, be recovered through a civil action brought by an aggrieved employee
on behalf of himself or herself and other current or former employees pursuant to the
procedures specified in Section 2699.3."
Section 558, by its terms and as we interpreted it in Thurman, expressly provides
for civil penalties and hence claims under section 558, including claims for underpaid
wages, are cognizable under the PAGA. As our holding in Thurman makes clear, the $50
and $100 assessments as well as the compensation for underpaid wages provided for by
section 558 subdivisions (a) and (b) are, together, the civil penalties provided by the
statute.
In this regard, we respectfully part company with the views recently expressed by
our colleagues in the Fifth District in Esparza v. KS Industries (2027) 13 Cal.App.5th
1228 (Esparza). In Esparza, the plaintiff, like Lawson, alleged a PAGA claim against his
18
employer and sought civil penalties under section 558. Relying on Iskanian, the trial
court denied the employer's motion to arbitrate. On appeal, the Court of Appeal reversed
and remanded. Like the trial court here, the Court of Appeal found the underpaid wages
portion of a claim under section 558 is subject to arbitration. (Esparza, at p. 1246.) The
court stated: "Employee's attempt to recover unpaid wages under Labor Code section
558 is, for purposes of the Federal Arbitration Act, a private dispute arising out of his
employment contract with KS Industries. In statutory terms, the wage claim is covered by
'[a] written provision in . . . a contract . . . to settle by arbitration a controversy arising out
of such contract.' (9 U.S.C. § 2.) The dispute over wages is a private dispute because,
among other things, it could be pursued by Employee in his own right. We recognize that
private disputes can overlap with the claims that could be pursued by state labor law
enforcement agencies. When there is overlap, the claims retain their private nature and
continue to be covered by the Federal Arbitration Act. To hold otherwise would allow a
rule of state law to erode or restrict the scope of the Federal Arbitration Act—a result that
cannot withstand scrutiny under federal preemption doctrine. Therefore, we conclude
preventing arbitration of a claim for unpaid wages would interfere with the Federal
Arbitration Act's goal of promoting arbitration as a forum for private dispute resolution.
(See Iskanian, supra, 59 Cal.4th at p. 389.)." (Ibid. (italics added).) Because the record
was not clear that the plaintiff in Esparza was seeking underpaid wages under section
558, the court remanded so that the plaintiff could clarify the scope of his claims. If the
plaintiff was seeking unpaid wages, the court directed they be arbitrated; if, on remand,
19
the plaintiff waived any claim to unpaid wages under section 558, the court ordered that
litigation of those limited claims proceed. (Esparza, at p. 1247.)
The court in Esparza also found that in light of Iskanian, our opinion in Thurman
was no longer an impediment to severance of underpaid wage claims brought under
section 558. (Esparza, supra, 13 Cal.App.4th at p. 1243.)
Our initial point of departure from Esparza is the opinion's apparent conclusion
that the plaintiff could pursue relief under section 558 in his own right. (Esparza, supra,
13 Cal.App.4th at p. 1246.) The court in Esparza cited no authority to support this
conclusion and the authority that has come to our attention has consistently found there is
no private right of action under section 558. (See Robles v. Agreserves, Inc., (2016 E.D.
Cal.) 158 F.Supp. 3d 952, 1066; Chang v. Biosuccess Biotech., Ltd. (2014 C.D. 2014) 76
F.Supp.3d 1022, 1049.) Rather, an individual may recover under section 558, only when
the individual has satisfied the procedural requirements set forth in the PAGA and is
acting in the place of and for the LWDA. (Robles, at p. 1066; Chang, at p. 1049.) In this
regard section 558 is distinguishable from the wage penalties provided by section 203,
and discussed in Iskanian; section 203, subdivision (b) expressly provides that "suit may
be filed" for those penalties. In general, where, as under section 558, there is no express
right of private enforcement and instead a regulatory agency has expressly been given the
right to enforce the statute, no private right of action will be implied. (See Vicko Ins.
Services, Inc. v. Ohio Indem. Co. (1999) 70 Cal.App.4th 55, 63–64.)
We also disagree with Esparza's treatment of our opinion in Thurman. While we
agree Thurman was decided before Iskanian, and that in Thurman we had no occasion to
20
address the preemption issues discussed in Iskanian, those circumstances in no sense
undermine the continuing validity of our holding in Thurman, to wit: in enacting section
558, the Legislature intended the underpaid wages recoverable under the statute, as well
as the $50 and $100 assessments provided by the statute, be treated as civil penalties and
that as civil penalties, neither type of recovery is severable for purposes of applying the
PAGA. (See Thurman, supra, 203 Cal.App.4th at pp. 1147–1148.) In Thurman, in
interpreting the intent of our Legislature in enacting section 558, we plainly did not
purport to consider the separate question of whether FAA preemption, which was only
later set forth in Concepcion, barred enforcement of the statute under the qui tam
procedures set forth in the PAGA. That separate preemption question was however
answered in Iskanian in its discussion of the distinction between civil penalties, which
can be enforced even when an employee is subject to a class waiver agreement and
statutory damages, which are preempted by such an agreement. (See Iskanian, supra, 59
Cal.4th at p. 381.)
The court in Iskanian made it clear that the distinction between civil penalties and
victim specific statutory damages hinges in large measure on whether, prior to enactment
of the PAGA, they could only be recovered by way of regulatory enforcement or whether
they supported a private right of action. (See Iskanian, supra, 59 Cal.4th at p. 381.) As
we have seen, section 558 provides no private right of action and by its terms is only
enforceable by the LWDA. (See Robles v. Agreserves, Inc., supra, 158 F.Supp. 3d at
p. 1066; Chang v. Biosuccess Biotech., Ltd., supra, 76 F.Supp.3d at p. 1049.)
21
We of course recognize that in finding no FAA preemption, the court in Iskanian
also relied on the fact the penalties it was considering were "largely" payable to the state.
(Iskanian, supra, 59 Cal.4th at pp. 887–888.) In Iskanian, 75 percent of the civil
penalties were payable to the LWDA and 25 percent were payable to employees. (Id. at
p. 380; § 2699, subd. (i).) Here, there is nothing in the record which suggests the
predominate amounts recovered under section 558 will be in the form of underpaid wages
payable to employees; indeed, we note that with respect to the meal break and rest break
violations alleged by Lawson, while section 558 provides either a $50 or $100 assessment
for each violation during a pay period, Lawson only alleges an underpaid wage loss of
one hour's wages for each violation. Thus, depending upon how many violations
occurred during a pay period and the effected employees' rate of pay, it is quite possible
that, at least as to the rest break and meal break allegations, the underpaid wage portion
of any recovery will fall within the 25 percent range implicitly approved by the court in
Iskanian.
In sum, because, prior to enactment of PAGA there was no private remedy under
section 558 and because there is no basis upon which to conclude that recovery under the
statute will largely go to individual employees, at this point, as in Iskanian, FAA
preemption does not apply.5
2. The Trial Court Erred
5 Our conclusion with respect to preemption is without prejudice to ZB's right to show, on a fuller factual record, that preemption should apply here. 22
Because claims under section 558 are indivisible claims for civil penalties, the trial
court's order bifurcating Lawson's PAGA claim between the denominated assessments
and underpaid wages was erroneous, as was its further order directing that the underpaid
wages be arbitrated as a representative action. As we have discussed, the courts in
Iskanian, Williams and Reyes have held that an individual employee's prior arbitration
agreement is no impediment to the employee's right to bring a distinct civil enforcement
action under the PAGA, notwithstanding the fact that the employee may have waived his
or her right to bring class or representative claims against his or her employer. As those
cases make clear, in bringing a PAGA action an employee is not acting on his or her own
behalf, but on behalf of the state and the state is not bound by the employee's prior
agreement, including any waiver of his or right to bring a representative action.
PAGA claims are not only outside the scope of a plaintiff's prior arbitration
agreement under the terms of the statute itself and Iskanian, arbitration of such a
representative claim also appears to run afoul of the principles set forth in Concepcion.
In particular, arbitration of a PAGA claim, which as the trial court noted, is always a
representative claim, would deprive defendants of the ability to challenge rulings on the
merits and de novo, posing for defendants considerable and unexpected risks. (See
Concepcion, supra, 563 U.S. at pp. 350–352.)
Accordingly, we must direct that the trial court vacate its order and enter a new
order denying Z.B.'s motion to arbitrate. Contrary to ZB's contention we have no power
to direct that the trial court modify its order so that Lawson be compelled to arbitrate an
individual underpaid wage claim. As the cases emphasize, under the PAGA Lawson is
23
acting as a representative of the state, which has not agreed to arbitrate its claim for civil
penalties. (Williams, supra, 237 Cal.App.4th at p. 649, citing Reyes, supra, 202
Cal.App.4th at p. 1124.)
DISPOSITION
The appeal is dismissed. Let a peremptory writ of mandate issue commanding the
trial court to vacate its order bifurcating Lawson's claims and ordering a portion of
those claims be arbitrated and enter a new order denying Z.B.'s motion to arbitrate.
Respondent to recover costs on appeal.
BENKE, Acting P. J.
WE CONCUR:
HUFFMAN, J.
HALLER, J.
24
AI Brief
AI-generated · verify before citing
Holding. The trial court erred in bifurcating the underpaid wages portion of a PAGA claim and ordering it to arbitration, as such claims are representative actions brought on behalf of the state and are not subject to private arbitration agreements.
Issues
Whether an order compelling arbitration is appealable.
Whether a PAGA claim for underpaid wages under Labor Code section 558 is subject to mandatory arbitration.
Disposition. Appeal dismissed; petition granted.
Quotations verified verbatim against the opinion
“An order granting a motion to arbitrate is not appealable.”
“In our disposition on the merits, we find the trial court erred in bifurcating the underpaid wages portion of Lawson's PAGA claim and ordering arbitration of that portion of the claim.”
“The FAA aims to promote arbitration of claims belonging to the private parties to an arbitration agreement. It does not aim to promote arbitration of claims belonging to a government agency”