Code violations. (Lab. Code, § 2699, subd. (a).)" (Arias v. Superior Court (2009) 46
Cal.4th 969, 980 (Arias).) A PAGA claim "is not a dispute between an employer and an
employee arising out of their contractual relationship. It is a dispute between an
employer and the state, which alleges directly or through its agents—either the [Labor
and Workforce Development] Agency or aggrieved employees—that the employer has
violated the Labor Code." (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348, 386–387 (Iskanian).) In Iskanian, the Supreme Court held that individual
employees cannot contractually agree to arbitrate or waive any predispute PAGA claims,
but they may agree to arbitrate their "individual damages claims." (Iskanian, supra, at p.
387.)
The MDM defendants moved to compel arbitration of that portion of Mejia's
PAGA claim in which she seeks "an amount sufficient to recover underpaid wages"
pursuant to section 558. Section 558 provides in relevant part:
"(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
1 Further statutory references are to the Labor Code unless otherwise indicated. 2
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.
"[¶] . . . [¶]
"(d) The civil penalties provided for in this section are in addition to any other civil or criminal penalty provided by law." (§558, subds. (a), (d).)
The MBM defendants contend that Mejia's claim to recover the portion of the
penalty under section 558 that represents underpaid wages amounts to a claim for
individual damages because it seeks "victim-specific relief," given that section 558
provides that any amount recovered representing the amount of underpaid wages are to
be directed to "the affected employee." The MBM defendants further contend that
because Mejia agreed to arbitrate any individual claim that she may have to her unpaid
wages, any claim that she asserts seeking the amount that is sufficient to recover
underpaid wages under section 558 must be separated from the remainder of the PAGA
3
claim and sent to arbitration.2 The MBM defendants maintain that only that portion of
Mejia's claim brought pursuant to section 558 in which she seeks to recover the $50 or
$100 per violation per employee civil penalty on behalf of herself and other aggrieved
employees may be brought by an individual plaintiff as a representative PAGA claim
that is not subject to arbitration.
The question presented in this case has been framed by other courts as a question
as to whether a single PAGA claim seeking recovery of the civil penalty provided for in
section 558 may be "split" in the way that the MBM defendants suggest. In other words,
may a court split a single PAGA claim so as to require a representative employee to
arbitrate that aspect of the claim in which the plaintiff seeks to recover the portion of the
penalty that represents the amount sufficient to recover underpaid wages where the
representative employee has agreed to arbitrate her individual wage claims, while at the
same time retain in the judicial forum that aspect of the employee's claim in which the
plaintiff seeks to recover the additional $50 or $100 penalties provided for in section 558
for each violation of the wage requirements? Appellate courts are divided on this
2 Although not entirely clear, the MBM defendants' argument appears to be that Mejia may seek only the amount of unpaid wages that represents her own underpaid wages, and that she cannot bring a claim seeking an amount representing the underpaid wages of other employees, even in an arbitral forum. Although the MBM defendants do not expressly explain the basis of their position in this regard, we understand the MBM defendants to be contending that the portion of Mejia's claim in which she seeks amounts sufficient to recover the underpaid wages of all affected employees pursuant to section 558 must be limited to a claim for only her own underpaid wages due to the existence of a collective bargaining agreement between the parties that provides that employees agree to resolve their wage and hour claims on an individual basis. 4
[concluding that claim for unpaid or underpaid wages under section 558 involves
"victim-specific relief" and is subject to arbitration where employee has agreed to
arbitrate private claims] with Lawson v. ZB, N.A. (2017) 18 Cal.App.5th 705, 724
(Lawson) [concluding that court may not split a PAGA claim seeking recovery of civil
penalties under section 558 in order to send the portion seeking section 558 unpaid or
underpaid wages penalties to arbitration because section 558 provides "no private right
of action and by its terms is only enforceable by the LWDA"] and Zakaryan v. The
Men's Wearhouse, Inc. (2019) 33 Cal.App.5th 659, 672 (Zakaryan) [concluding that
court may not split a PAGA claim seeking recovery of civil penalties under section 558
in order to send the portion seeking section 558 underpaid wages penalties to arbitration
because "an individual PAGA plaintiff is at all times acting on behalf of the [Labor and
Workforce Development Agency (the Agency)] when seeking underpaid wages as well
as the $50/$100 penalty," such that "his pursuit of both remedies 'involv[es] the same
parties seek[ing] compensation for the same harm' and thus involves 'the same primary
right' "].)3 The issue is pending before the Supreme Court in Lawson, supra, review
granted Mar. 21, 2018, S246711.
3 Other cases also agree that a single PAGA claim may not be split into two claims, with only a "portion" of a PAGA claim being sent to arbitration. (See Williams v. Superior Court (2015) 237 Cal.App.4th 642, 649 [no authority to support trial court's decision to "split" PAGA claim and send question of whether the plaintiff was an "aggrieved employee" to arbitration; case law instead "suggests that a single representative PAGA claim cannot be split into an arbitrable individual claim and a nonarbitrable representative claim"]; Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 676–678 [rejecting defendant's argument that court "should compel arbitration of 'the individual portion of [the plaintiff's] PAGA claim' and stay 'the 5
We agree with the conclusion of the Lawson and Zakaryan courts on this
question, and conclude that a single PAGA claim seeking to recover section 558 civil
penalties may not be "split" between that portion of the claim seeking an "amount
sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or
$100 per-violation, per-pay-period assessment imposed for each wage violation.4 The
result is that an employee bringing a PAGA claim to recover the civil penalties identified
in section 558 may not be compelled to arbitrate that portion of her PAGA claim that
seeks an amount sufficient to recover underpaid wages pursuant to that statute, while the
rest of the claim that seeks the $50 or $100 per-pay-period per violation portion of the
penalty remains in a judicial forum. We therefore affirm the trial court's order denying
the MDM defendants' motion to compel arbitration in this case.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background
According to the President of Merchants Building Maintenance, LLC, it is "a
maintenance company that primarily provides janitorial services." Merchants Building
representative portion' pending completion of arbitration"]; Perez v. U-Haul Co. of California (2016) 3 Cal.App.5th 408, 420–421 [rejecting contention that "an employer may force an employee to split a PAGA claim into 'individual' and 'representative' components, with each being litigated in a different forum"].)
4 Although the Lawson and Zakaryan courts reached the same conclusion that we reach here, they disagreed as to one aspect regarding the allocation of any civil penalties recovered by a PAGA plaintiff. (See Zakaryan, supra, 33 Cal.App.5th at p. 677 ["We agree with Lawson's central holding but disagree with its subsidiary holding regarding the allocation of the 'civil penalties' recovered"].) 6
Maintenance Company "operates as a payroll and administrative services company for
[Merchants Building Maintenance, LLC]." Mejia alleges that she and other aggrieved
individuals were employed by the MBM defendants as nonexempt employees.
Mejia was a union member during her employment with the defendants. In 2016,
Merchants Building Maintenance, LLC and Mejia's union entered into a collective
bargaining agreement (CBA). The CBA was ratified by the bargaining-unit employees
on May 1, 2016. A provision in the CBA requires that bargaining-unit employees
resolve their private wage and hour disputes on an "individual basis" by following a
mediation and arbitration protocol, which, pursuant to the terms of the CBA, is governed
by the Federal Arbitration Act (FAA).
Mejia alleges that the defendants engaged in a number of Labor Code violations.
Specifically, according to Mejia, (1) the defendants had a "policy and practice" of failing
to provide employees with thirty-minute meal periods or provide compensation in lieu of
the meal breaks; (2) the defendants did not permit or authorize Mejia and other
employees to take "net 10-minute rest periods for every four hours worked" or provide
compensation in lieu of the rest breaks; (3) the defendants did not pay her or other
employees "all wages at the legal minimum and/or overtime rate" when the employees
were required to work through their meal periods, and thereby failed to pay plaintiff and
similar employees "for all hours worked"; (4) the defendants failed to provide her and
other employees with "accurate itemized wage statements"; and (5) the defendants failed
to timely pay Mejia and other former employees their final wages upon the employees'
separation from employment.
7
B. Procedural background
Mejia filed a complaint against the MBM defendants asserting a single cause of
action, pursuant to PAGA, to address these various Labor Code violations. Specifically,
Mejia identifies the following Labor Code provisions as having been violated: sections
226.7 and 512 (failure to provide meal periods); sections 226.7 (failure to provide rest
periods); sections 510, 1194, 1194.2, 1197, and 1198 (failure to pay legal minimum
wage and/or overtime at the correct rate); sections 226 and 226.3 (failure to provide
accurate itemized wage statements); and sections 201, 202, 203, 204, and 210 (failure to
timely pay all earned wages owed upon separation from employment).
The MBM defendants moved to compel arbitration of one aspect of Mejia's
PAGA claim, and requested a stay of the remaining aspects of Mejia's claim.
Specifically, the MBM defendants sought an order compelling Mejia to arbitrate that
portion of her PAGA claim in which, according to MBM, she sought "to recover victim-
specific relief," i.e., "the unpaid wages that MEJIA claims were due her and which were
allegedly unpaid by the MBM [defendants]." The MBM defendants argued that "the
recovery available under Labor Code section 558 is unpaid wages and the right of
recovery inures solely to the benefit of the employee and not to the State."
The trial court denied the motion to compel arbitration without stating its
reasoning.5
5 The court did not rule on the related request for a stay of the remaining aspects of Mejia's claim, effectively denying the request. 8
The MBM defendants filed a timely notice of appeal from the order denying their
petition to compel arbitration.
III.
DISCUSSION
The MBM defendants challenge the trial court's refusal to order Mejia to arbitrate
the portion of Mejia's PAGA claim that seeks to recover "an amount sufficient to recover
underpaid wages" pursuant to section 558, subdivision (a). As noted, there is
disagreement among courts as to whether that portion of a plaintiff's PAGA claim
seeking the civil penalties of the "amount sufficient to recover underpaid wages" that are
made available in section 558 may be split from the remainder of a plaintiff's PAGA
claim for other civil penalties and sent to an arbitral forum. We now consider the issue.
A. Relevant legal standards
1. Standards on review from the court's ruling on the motion to compel arbitration
We agree with the Zakaryan court that the "arbitrability of a portion of a PAGA
claim presents a legal question that lies at the intersection of California labor law and
arbitration law," and that we therefore review the trial court's ruling on this issue de
novo. (Zakaryan, supra, 33 Cal.App.5th at p. 667, citing Julian v. Glenair, Inc. (2017)
17 Cal.App.5th 853, 864 (Julian) [review is de novo when denial of a motion to compel
"relies on a determination of law"].)
9
2. Labor law enforcement
Traditionally, the Labor Code has provided several mechanisms allowing for the
enforcement of the substantive protections for employees that are set forth in the Labor
Code.
First, for example, an aggrieved employee may pursue a judicial action or
administrative action on her own behalf: "[I]f 'an employer fails to pay wages in the
amount, time or manner required by contract or by statute, the employee has two
principal options. The employee may seek judicial relief by filing an ordinary civil
action against the employer for breach of contract and/or for the wages prescribed by
statute. (§§ 218, 1194.) Or the employee may seek administrative relief by filing a
wage claim with the commissioner pursuant to a special statutory scheme codified in
sections 98 to 98.8." (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1084 (Reynolds),
abrogated on other grounds in Martinez v. Combs (2010) 49 Cal.4th 35.)
Regardless of the legal theory advanced, an employee's recovery for a private
cause of action is limited to the amount the Legislature has determined is the appropriate
amount to compensate the employee for the injuries that she has suffered, both economic
and noneconomic, as a result of the employer's violation or violations. (See Murphy v.
payment and meal and rest break pay recoverable under section 226.7 represents both the
economic and "noneconomic injuries employees suffer from being forced to work
through rest and meal periods"]; Villacres v. ABM Industries Inc. (2010) 189
Cal.App.4th 562, 578 ["Before the PAGA was enacted, an employee could recover
10
damages, reinstatement, and other appropriate relief but could not collect civil penalties"
(italics added)].) With respect to administrative relief, an employee may file a wage
claim with, and have the claim adjudicated by, the Labor Commissioner. (§§ 98–98.8;
Reynolds, supra, 36 Cal.4th at p. 1084.)
Second, the Labor Commissioner may initiate proceedings against the employer
and seek a variety of remedies. (See §§ 1193.6 [authorizing action for "unpaid overtime
compensation"], 1194.5 [authorizing action for injunctive relief], 217 [authorizing action
to recover penalties].) For example, with respect to violations of the overtime and meal
and rest period rules, section 558 specifies the civil penalty that the Labor Commissioner
may recover from an employer—i.e., an amount sufficient to recover the wages that were
underpaid plus an additional $50 for the first violation against each employee for each
pay period, and an additional $100 for any subsequent violation against each employee
for each pay period. (§ 558, subd. (a).) Upon recovering civil penalties from an
employer, the Labor Commissioner is directed to give that portion of the penalty that
represents the "[w]ages recovered" under section 558 to the "affected employee" (§ 558,
subd. (a)(3)), while the remainder is to go to the Labor and Workforce Development
Agency (§ 558, subd. (b); Iskanian, supra, 59 Cal.4th at p. 378).6
6 Section 558 authorizes "only . . . the Labor Commissioner to recover the penalties," and does not provide a private right of action allowing individual employees to seek their unpaid wages as damages. (Atempa v. Pedrazzani (2018) 27 Cal.App.5th 809, 826 (Atempa); see Robles v. Agreserves, Inc. (E.D. Cal. 2016) 158 F.Supp.3d 952, 1006 [concluding that "there is no private cause of action created by Labor Code § 558" and citing other cases stating the same].) 11
Finally, under the scheme set forth in the Labor Code, a local prosecuting
authority may prosecute an employer where the violations of certain provisions of the
Labor Code are designated as misdemeanors (see, e.g., §§ 215, 216, 218) or infractions
(see, e.g., § 226, subd. (c)).
In 2003, the Legislature created another mechanism for enforcing California's
labor laws through the enactment of the PAGA. The Legislature recognized that
enforcement authorities had insufficient incentive and resources to sue employers for
Labor Code violations. (Iskanian, supra, 59 Cal.4th at p. 379.) PAGA addressed this
problem by deputizing "aggrieved" (§ 2699, subd. (a)) employees as private attorneys
general, permitting them to act "as the proxy or agent of the state's labor law
enforcement agencies" (Arias, supra, 46 Cal.4th at p. 986). PAGA does this by
"and other current or former employees." (§ 2699, subd. (a).) PAGA also establishes a
default civil penalty for all Labor Code violations for which a penalty has not already
been statutorily provided. (§ 2699, subd. (f).)
A PAGA action is " 'fundamentally a law enforcement action designed to protect
the public and not to benefit private parties.' " (Arias, supra, 46 Cal.4th at p. 986.) An
employee may not file her PAGA claim for particular labor law violations until having
first provided the agency with the opportunity to investigate and file the claim itself.
(§§ 2699, subd. (a), 2699.3 [setting forth procedures for notifying agency].) If the
agency elects not to pursue an action itself, the agency is nevertheless legally bound by
the outcome of the proceeding to adjudicate the employee's PAGA claim. (Arias, supra,
12
at pp. 985–986.) In the same way that an action brought by the agency would be brought
on behalf of all aggrieved employees, an aggrieved employee PAGA plaintiff brings her
claim on behalf of all other aggrieved employees. (Julian, supra, 17 Cal.App.5th at p.
866, fn. 6 [a PAGA plaintiff brings a "representative" claim in two ways—both as a
proxy for the state and insofar as the claim "seeks penalties on behalf of other
employees"]; Huff v. Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745,
750–751 [a PAGA plaintiff has standing to bring claims for violations so long as any
other employee is "aggrieved" by the alleged violation, even if representative plaintiff
was not injured by all of the alleged violations].) Further, the PAGA statute provides
that the "civil penalties recovered" are to be divided in a way that favors the agency, in
that 75 percent of what is recovered is to go to the agency (to use for enforcement,
administration and education) and 25 percent is to go to the "aggrieved employees."
(§ 2699, subds. (i), (j).)7
" '[E]very PAGA action, whether seeking penalties for Labor Code violations as
to only one aggrieved employee—the plaintiff bringing the action—or as to other
employees as well, is a representative action on behalf of the state.' " (Iskanian, supra,
59 Cal.4th at p. 387.) A PAGA action is thus ultimately founded on a right belonging to
7 As explained in Iskanian, "[a] PAGA representative action is therefore a type of qui tam action. 'Traditionally, the requirements for enforcement by a citizen in a qui tam action have been (1) that the statute exacts a penalty; (2) that part of the penalty be paid to the informer; and (3) that, in some way, the informer be authorized to bring suit to recover the penalty.' [Citation.] The PAGA conforms to these traditional criteria, except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation." (Iskanian, supra, 59 Cal.4th at p. 382, italics added.) 13
the state, which—though not named in the action—is the real party in interest.
(Iskanian, supra, at p. 387.) PAGA does not create any new substantive rights for the
benefit of employees, nor does it create new legal obligations for employers; rather, it "is
simply a procedural statute allowing an aggrieved employee to recover civil penalties—
for Labor Code violations—that otherwise would be sought by state labor law
enforcement agencies." (Amalgamated Transit Union, Local 1756, AFL–CIO v.
Superior Court (2009) 46 Cal.4th 993, 1003, italics added.)
3. The intersection between arbitration law and PAGA
Private parties, including employers and employees, may contractually agree to
resolve their disputes through arbitration. (Rent-A-Center, W., Inc. v. Jackson (2010)
561 U.S. 63, 67 ["arbitration is a matter of contract"].) Such contracts are enforceable as
a matter of federal law under the Federal Arbitration Act (FAA). (9 U.S.C. § 2 ["A
written provision in any . . . contract evidencing a transaction involving commerce to
settle by arbitration a controversy thereafter arising out of such contract or
transaction . . . or an agreement in writing to submit to arbitration an existing controversy
arising out of such a contract . . . shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract"]; AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344 ["The 'principal purpose' of the
FAA is to 'ensur[e] that private arbitration agreements are enforced according to their
terms.' [Citations]"].)
In Iskanian, supra, 59 Cal.4th 348, the California Supreme Court explained that
an employee cannot contractually agree to give up a potential PAGA claim against his or
14
her employer. (Iskanian, supra, at pp. 378–392.) The court in Iskanian declared that
PAGA waivers made "before any dispute arises" are unenforceable, given that they
"harm the state's interests in enforcing the Labor Code" and thus are contrary to public
policy. (Iskanian, at pp. 360–361, 383–384, 388.) Further, the Iskanian court explained
that a rule rendering predispute waivers of PAGA claims unenforceable does not run
afoul of the FAA because the FAA is concerned with "ensur[ing] an efficient forum for
the resolution of private disputes, whereas a PAGA [claim] is a dispute between an
employer and the state Agency." (Iskanian, at p. 384, italics added.) However, an
employee's non-PAGA claim or claims for "individual damages" constitutes a private
dispute and thus, under the FAA, should be sent to arbitration if the employer and
employee have so agreed. (Iskanian, at p. 391.)
B. Analysis
Whether the trial court erred in denying the MBM defendants' motion to compel
Mejia to arbitrate turns on whether a PAGA claim that seeks to recover the remedies
available to the Labor Commissions pursuant to section 558 may (or should) be split into
two separate claims based on the two aspects of the relief that is recoverable pursuant to
section 558—i.e., a claim for the $50 and $100 per-pay-period penalties and a claim for
that portion of the penalty that represents an amount sufficient to recover underpaid
wages. Under the MBM defendants' theory, Mejia is seeking "victim-specific recovery
for herself" when she requests that portion of the section 558 penalty that constitutes "an
amount sufficient to recover underpaid wages." The MBM defendants contend that for
this reason, this aspect of Mejia's claim should be split from the remainder of her section
15
558 PAGA claim and sent to arbitration while the $50 and $100 portion of the penalties
sought for all aggrieved employees would constitute a separate claim for a collective
remedy and could remain in court.8 We agree with the Lawson and Zakaryan courts that
the claim splitting that the MBM defendants seek is impermissible.
First, this court has already concluded that the "civil penalty" provided for in
section 558 is single civil penalty, despite the fact that the penalty comprises two parts:
"We disagree [with the defendant's position] that section 558 provides for a civil penalty
of $50 or $100 only, and that it clearly excludes underpaid wages from the civil penalty
[and provides for them as restitution for unpaid wages instead]. In our view, the
language of section 558, subdivision (a), is more reasonably construed as providing a
civil penalty that consists of both the $50 or $100 penalty amount and any underpaid
wages . . . ." (Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th
1112, 1145 (Thurman), italics added.) Although Thurman was decided before Iskanian,
and the Thurman court was not considering questions related to the intersection of
PAGA and arbitration governed by the FAA, the Thurman court was considering a
question relevant to the issue here: In enacting section 558, did the Legislature intend
for both the amount sufficient to cover underpaid wages and the $50 or $100 per
violation per-pay-period assessment to be treated as a single civil penalty recoverable by
8 Again, throughout their briefing, the MBM defendants repeatedly refer to Mejia as seeking her own "underpaid wages," and not any amounts representing the underpaid wages of other employees. Although not expressly stated, we assume that this is based on the existence of the CBA, which limits employees to bringing only individual claims for wage relief. 16
the Labor Commissioner and thus recoverable by an aggrieved employee in a PAGA
action? The Thurman court answered this question in the affirmative based on the plain
meaning of the words of the statute: "[T]he civil penalty [section 558] specifies consists
of both an assessment of $50 for initial violations or $100 for subsequent violations and
an amount sufficient to recover underpaid wages." (Thurman, supra, at p. 1147, italics
added.)
MBM has provided us with no reason to deviate from the Thurman court's
conclusion that it is the monetary assessments together with the "amount sufficient to
recover underpaid wages" provided for in section 558 that comprises a single civil
penalty. Section 558, by its very terms, provides for the imposition of a civil penalty that
consists of two components—"fifty dollars ($50) for each underpaid employee for each
pay period . . . in addition to an amount sufficient to recover underpaid wages," or, for
subsequent violations, "one hundred dollars ($100) for each underpaid employee for
each pay period . . . in addition to an amount sufficient to recover underpaid wages."
(§ 588, subd. (a), italics added.)9 The fact that one of these two components is not a
9 Further, we are not convinced that the language of a separate Labor Code provision, section 1197.1, subdivision (c), is helpful in understanding what the Legislature meant when it defined the "civil penalty" in section 558, subdivision (a) as involving both the $50 or $100 per violation amount as well as an amount equal to the underpaid wages. Section 1197.1, subdivision (c) provides for the posting of a bond by any petitioner who seeks a writ of mandate from a finding by the Labor Commissioner that an assessment of a "civil penalty, wages, liquidated damages, and any applicable penalties imposed pursuant to Section 203" (§ 1197.1, subd. (c)(1)) is due. (See § 1197.1, subd. (c)(1), (c)(2), (c)(3).) Subdivision (c)(3) provides in relevant portion: "As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the Labor Commissioner equal to the total amount of any 17
predetermined amount, but, rather, is an amount directly proportional to the scope of
wage violation at issue, does not alter the fact that the two components jointly comprise a
single civil penalty. In this way, section 588, subdivision (a)'s reference to the "amount
sufficient to recover underpaid wages" provides a method of measurement for
minimum wages, liquidated damages, and overtime compensation that are due and owing as determined pursuant to subdivision (b) of Section 558, as specified in the citation being challenged. The bond amount shall not include amounts for penalties." Although on a first reading one might view this provision as distinguishing between "minimum wages" that are due pursuant to section 558 and the "penalties" that might be due under section 558, we think such a reading would be inaccurate. Specifically, subdivision (c)(3) of section 1197.1 refers to subdivision (b) or section 558, which does not define or otherwise refer to the "civil penalty" set forth in subdivision (a) of section 558. Rather, subdivision (b) of section 558 provides: "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." Thus, section 1197.1, subdivision (c)(3)'s reference to section 558 is highlighting the authorization provided to the Labor Commissioner in that section to "issue a citation" for violations of that chapter—a chapter that sets forth rules regarding workweeks, overtime pay and meal periods—similar to the authorization in section 1197.1, subdivision (b) that permits the Labor Commissioner to issue citations for civil penalties, liquidated damages, and other applicable penalties imposed pursuant to section 203. The fact that the Legislature decided not to require that the bond amount provided for in section 1197.1, subdivision (c)(3) include "amounts for penalties" does not provide any insight as to whether the Legislature intended for those "penalties" to comprise the $50 or $100 per-pay-period penalty amount plus an amount equal to underpaid wages or the $50 or 100 per-pay-period penalty amounts, alone.
18
determining the amount of the civil penalty that is to be imposed, and not a reference to
the recovery of the individual employees' actual unpaid wages.10
Again, the Labor Commissioner is the party entitled to recover the civil penalty
set forth in section 558, subdivision (a); individual employees are not granted a private
right of action to obtain section 558 penalties. (See, e.g., Thurman, supra, 203
Cal.App.4th at p. 1148 ["the Legislature . . . authorized the LWDA to recover underpaid
wages on behalf employees in the form of a civil penalty under section 558"]; Atempa,
supra, 27 Cal.App.5th at p. 826 [section 558 authorizes only the Labor Commissioner to
seek its penalties].)
It is only because of a different statute—section 2699, subdivision (a)—that an
aggrieved employee may seek to recover the civil penalties provided for in section 558.
(See Thurman, supra, 203 Cal.App.4th at p. 1148 [an aggrieved employee who is acting
as the proxy or agent of the Labor Commissioner or Labor and Workforce Development
Agency by bringing a PAGA action may recover the civil penalty provided for in section
558].) Given that a claim for recovery of civil penalties provided for in section 558 is
one that was originally bestowed by the Legislature on the Labor Commissioner, and that
the only way an aggrieved employee can seek the civil penalties addressed in section 558
is through a representative PAGA claim, it becomes clear that a single PAGA claim
10 This is not the only instance in the Labor Code in which the Labor Commissioner is authorized to recover a civil penalty that will vary because it reflects the wages involved in the violation at issue. (See § 256 ["The Labor Commissioner shall impose a civil penalty in an amount not exceeding 30 days pay as waiting time under the terms of Section 203"].) 19
seeking such penalties cannot be "split" into an individual claim and a collective claim,
so as to have part of the claim decided in an arbitral forum while the other part is decided
in a judicial forum.
Specifically, as the Zakaryan court recently explained, the primary rights theory
demonstrates why such "splitting" of a PAGA claim for section 558 penalties is
impermissible. (See Zakaryan, supra, 33 Cal.App.5th at pp. 671–672.) Under the
primary rights theory, " 'one injury gives rise to only one claim for relief' " (Boeken v.
Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798 (Boeken)). A plaintiff is prohibited
from " 'divid[ing] a primary right and enforc[ing] it in two suits.' " (Mycogen Corp. v.
Monsanto Co. (2002) 28 Cal.4th 888, 904.)
A primary right is defined neither by the legal theory asserted (Cal Sierra
Development, Inc. v. George Reed, Inc. (2017) 14 Cal.App.5th 663, 677–678) nor by the
remedy being sought (Crowley v. Katleman (1994) 8 Cal.4th 666, 682). Rather, a
"primary right" is "the plaintiff's right to be free from the particular injury suffered." (Id.
at p. 682.) As a general matter, "the same primary right" is at stake "[w]hen two actions
involving the same parties seek compensation for the same harm." (Boeken, supra, 48
Cal.4th at p. 798, italics added.)
When the Labor Commissioner commences an administrative or judicial action
against an employer for wage violations, the Commissioner is seeking to vindicate the
state's right to be free from injury resulting from violations of the labor laws. Thus an
aggrieved employee who asserts a PAGA claim for wage violations is stepping into the
shoes of the Labor Commissioner and seeking to "vindicat[e] one and only one
20
'particular injury'—namely, the injury to the public that the 'state labor law enforcement
agencies' were created to safeguard." (Zakaryan, supra, 33 Cal.App.5th at p. 672,
quoting Arias, supra, 46 Cal.4th at p. 986 ["In a lawsuit brought under [PAGA], the
employee plaintiff represents the same legal right and interest as state labor law
enforcement agencies"] and citing Iskanian, supra, 59 Cal.4th at pp. 380, 387.) In a
PAGA action asserting wage violations where the aggrieved employee is acting as the
proxy or agent of the state, that individual employee's "personal claims" for underpaid
wages are "not at stake," nor are the personal claims of other injured employees at stake.
(Williams v. Superior Court (2017) 3 Cal.5th 531, 547, fn. 4.) That individual
employees' personal claims are not at stake is supported by (1) the fact that an individual
PAGA plaintiff and the other aggrieved employees represented by that PAGA claim may
still bring their own separate individual claims for underpaid wages—i.e., their private
victim-specific recovery (§ 2699, subd. (g)(1) ["Nothing in [PAGA] shall operate to limit
an employee's right to pursue or recover other remedies available under state or federal
law, either separately or concurrently with an action taken under this part"]), and (2) the
fact that nonparty aggrieved employees are not bound by an adverse PAGA judgment
when pursuing their own individual claims (Arias, supra, at pp. 985–987 [for purposes of
civil penalties, a PAGA judgment "is binding not only on the named employee plaintiff
but also on government agencies and any aggrieved employee not a party to the
proceeding," but where the employer prevails, nonparty employees are not bound as to
remedies other than civil penalties].) Because a PAGA plaintiff is acting on behalf of the
agency when seeking amounts sufficient to recover the underpaid wages as well as the
21
$50/$100 penalty that the Labor Commissioner could recover, and is not pursuing an
individual claim for her own unpaid wages, the PAGA plaintiff's pursuit of this civil
penalty (a penalty that is involves two parts) "involv[es] the same parties seek[ing]
compensation for the same harm" and thus involves "the same primary right." (Boeken,
supra, 48 Cal.4th at p. 798.) Therefore, attempting to "split" a PAGA claim for civil
penalties under section 558 into two separate claims—a claim for an amount equal to the
underpaid wages and a representative claim for the $50/$100 per-pay-period penalties
that PAGA incorporates from section 558—would impermissibly divide a single primary
right.
We reject the MBM defendants' contention that the opinions in Broughton v.
Cigna Healthplans (1999) 21 Cal.4th 1066 (Broughton) and Cruz v. PacifiCare Health
Systems, Inc. (2003) 30 Cal.4th 303 (Cruz) "demonstrate that the existence of a private
right of action is not the test for whether a claim may be subject to arbitration under the
FAA," and further "demonstrate that a single claim under the CLRA or the UCL may be
severed into its arbitrable or inarbitrable pieces as necessary to be consistent with the
FAA's mandate . . . ." What the MBM defendants fail to appreciate is that there is a
difference between the rights provided to individuals pursuant to the CLRA and UCL
and those granted to aggrieved employees under PAGA that makes CLRA and UCL
cases inappropriate for comparison in the PAGA context. Specifically, the CLRA and
UCL permit an individual not only to seek relief that is generally for the benefit of the
public, but also to seek relief to make the individual plaintiff whole, through damages
and/or restitution (in the case of the CLRA) or restitution (in the case of the UCL). (Civ.
22
Code, § 1780, subd. (a) [authorizing "[a]ny consumer who suffers any damage" as a
result of method, act or practice declared unlawful under Civ. Code section 1770 to
recover "[a]ctual damages," an injunction, "[r]estitution of property," "[p]unitive
damages" or "[a]ny other relief" deemed proper]; Bus. & Prof. Code, § 17203
[authorizing court to "enjoin" "[a]ny person who engages . . . in unfair competition" and
further authorizing court to "make such orders or judgments . . . as may be necessary to
restore to any person in interest any money or property, real or personal, which may have
been acquired by means of such unfair competition"].)
Thus, for example, the Broughton court determined that an individual plaintiff's
claim, brought pursuant to the Consumers Legal Remedies Act (CLRA) (Civ. Code,
§ 1750 et seq.) could be split into two and decided in two different fora. Specifically,
that portion of the plaintiff's claim seeking relief in the form of damages under the
CLRA could be sent to arbitration and that portion of the plaintiff's claim seeking
"we must assume that . . . the Legislature was aware of existing related laws . . . "]).
Given that PAGA includes no exceptions to its mandatory distribution rules, we can
assume that the Legislature intended that the provisions in PAGA pertaining to the
distribution of civil penalty recoveries supersede any penalty distribution provisions in
the Labor Code when those provisions conflict. Thus, it appears that the Legislature
26
intended that when an individual aggrieved employee steps into the shoes of the Labor
Commissioner and recovers the civil penalties that would otherwise be recoverable
solely by the Labor Commissioner, that plaintiff's recovery is subject to the distribution
rules pertaining to the civil penalties recovered in a PAGA action, regardless of the
existence of a different distribution scheme that would apply if the claim were brought
by the Labor Commissioner. Therefore, unlike a situation in which the Labor
Commissioner recovers section 558 penalties directly, where the section 588 penalties
are recovered by an individual employee acting in a representative capacity for the state,
any penalty or penalties recovered under section 588 (i.e., both the $50 or $100 and the
amount sufficient to recover underpaid wages) are to be allocated 75 percent to the
Agency and 25 percent to the plaintiff (who is to share that 25 percent with the other
aggrieved employees).11 (See § 2699, subd. (i).) At least two other courts have recently
concluded that this is how section 588, subdivision (a)(3) and section 2699, subdivision
(i) should be reconciled. (See Zakaryan, supra, 33 Cal.App.5th at pp. 673–674 [PAGA
11 On this point, we diverge from the Thurman court's conclusion that section 558's statement that the amount representing the underpaid wages is to go to the affected employees is an "exception" to the general PAGA rule that civil penalties recovered in a PAGA action are distributed 75 percent to the LWDA and 25 percent to the aggrieved employees. (See Thurman, supra, 203 Cal.App.4th at p. 1147.) Thurman was decided without the benefit of the Supreme Court's opinion in Iskanian outlining the significance of a PAGA action as being one in which "any resulting judgment is binding on the state and any monetary penalties largely go to state coffers" to ensuring that California's public policy of prohibiting predispute waivers of PAGA claims does not contravene the FAA. (See Iskanian, supra, 59 Cal.4th at p. 388.) However, after giving consideration to the principles discussed in Iskanian, we conclude that the better interpretation of the interplay between section 558 and PAGA is that PAGA provides for the distribution of the recovery of civil penalties as among and between the employees and the Agency when an employee recovers those penalties through a PAGA action. 27
allocation rules apply when employee is bringing a PAGA claim]; Atempa, supra, 27
Cal.App.5th at pp. 828–829 [modifying judgment to provide "that the section 558(a)
civil penalties awarded to [the plaintiffs] be distributed 75 percent to the LWDA and 25
percent to the aggrieved employee[s] according to section 2699, subdivision (i)"].)
A PAGA claim is, fundamentally, a representative claim. PAGA allocates 25
percent of the civil penalties recovered to the "aggrieved employees" to give individual
employees an incentive to sue on the agency's behalf, and not as a means of awarding
59 Cal.4th at pp. 387–388.) The distinction between "a PAGA litigant's status as 'the
proxy or agent' of the state" versus an employee acting solely on her own behalf and
"purs[uing] . . . victim-specific relief" is the underpinning of the Iskanian court's
determination that PAGA claims are exempt from arbitration: "The civil penalties
recovered on behalf of the state under the PAGA are distinct from the statutory damages
to which employees may be entitled in their individual capacities." (Iskanian, supra, at
pp. 387–388.) The argument that one can split off some portion of a PAGA claim on the
ground that that portion seeks recovery that would constitute "victim-specific relief"
ignores the definitional aspect of a PAGA claim—i.e., its representative nature.
The MBM defendants nevertheless argue that Mejia "did not need to invoke
PAGA to allege unpaid wages claims under those statutes [that grant employees a private
right of action, some of which underlie Mejia's PAGA claim] . . . to recover her victim-
specific damages for those statutory violations." They assert that if Mejia had "sought to
sue solely in her own individual capacity for those alleged violations, she would have
28
been required to arbitrate those unpaid wages claims," and argue that "by artful
pleading," Mejia is being permitted to "assert a non-PAGA claim . . . in an attempt to
avoid arbitration." However, the fact that an aggrieved employee has the choice to bring
a PAGA claim, rather than to assert a claim based on her private right of action, is
beyond dispute. As previously discussed, an aggrieved employee who desires to pursue
judicial relief for her employer's violation of the overtime or meal and rest period rules
(as opposed to administrative relief) has the option of (1) filing a lawsuit asserting a
claim in her individual capacity based on a private cause of action (see §§ 1194, 218);
(2) filing a lawsuit asserting a PAGA claim in a representative capacity on behalf of the
state (see § 2699); or (3) filing a lawsuit asserting both an individual claim and a PAGA
claim. If the employee chooses the first or third option, the employee may obtain and
keep for herself all of the underpaid wages she may recover in pursuing her private right
of action; but in choosing either of these options, the employee's personal claim for
Labor Code violations is subject to arbitration if the employee has agreed to arbitrate her
personal claims. (§§ 1194, 218; Iskanian, supra, 59 Cal.4th at p. 391.) If, on the other
hand, the employee chooses the second option and files a lawsuit asserting only a PAGA
claim, the employee may recover the civil penalties due for the wage violations for
herself and for her fellow employees without having to pursue the claim in an arbitral
forum, but she will be required to give 75 percent of the total recovery to the agency and
to split the remaining 25 percent with other aggrieved employees. (§§ 2699, subds. (a),
(i); Iskanian, supra, at p. 382 [a PAGA action "conforms to these traditional criteria" for
bringing a qui tam action, "except that a portion of the penalty goes not only to the
29
citizen bringing the suit but to all employees affected by the Labor Code violation"];
Moorer, supra, 32 Cal.App.5th at pp. 742–743 [the 25 percent of the total recovery of
civil penalties is to be shared among all aggrieved employees].) Each path has potential
advantages and potential detriments, and fundamentally, the choice as to which path to
pursue belongs to the employee. (See Iskanian, at p. 383 ["employees are free to choose
whether or not to bring PAGA actions when they are aware of Labor Code violations"].)
But allowing a plaintiff's single PAGA claim to be "split" into two claims effectively
usurps the plaintiff's choice to pursue a PAGA action, alone, and has the effect of
rewriting the plaintiff's complaint into one that asserts an individual claim for underpaid
wages (which would be subject to arbitration) and a PAGA claim (which would remain
in court). We believe that rewriting a plaintiff's complaint in this way is inappropriate,
and we decline to do so.
IV.
DISPOSITION
The order of the trial court denying the MBM defendants' motion to compel
arbitration is affirmed. Mejia is entitled to costs on appeal.
AARON, J.
WE CONCUR:
BENKE, Acting P. J.
HUFFMAN, J.
30
AI Brief
AI-generated · verify before citing
Holding. The court held that a single Private Attorneys General Act (PAGA) claim seeking civil penalties under Labor Code section 558 cannot be split into separate claims for arbitration purposes. Consequently, an employee cannot be compelled to arbitrate the portion of a PAGA claim seeking an amount sufficient to recover underpaid wages while litigating the remainder of the claim in court.
Issues
Whether a single PAGA claim seeking recovery of civil penalties under Labor Code section 558 may be split into arbitrable and non-arbitrable components.
Whether the portion of a section 558 penalty representing 'an amount sufficient to recover underpaid wages' constitutes an individual claim subject to arbitration.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“a single PAGA claim seeking to recover section 558 civil penalties may not be "split" between that portion of the claim seeking an "amount sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or $100 per-violation”
“an employee bringing a PAGA claim to recover the civil penalties identified in section 558 may not be compelled to arbitrate that portion of her PAGA claim that seeks an amount sufficient to recover underpaid wages”