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Shipt and its parent company Target appealed from an order denying their motion to compel arbitration in an action brought against them under the Labor Code Private Attorneys General Act of 2004 (PAGA). The Court of Appeal denied the motion on the basis that the plaintiff's PAGA action didn’t allege any individual claims subject to arbitration under the parties' arbitration agreement. The Supreme Court has recently granted review.
Background
Shipt is an online ordering platform whose members arrange for its shoppers to purchase and provide delivery of goods from local merchants. The plaintiff entered into an independent contractor agreement with Shipt to provide services as a Shipt shopper. The agreement referenced and incorporated a separate arbitration agreement the plaintiff and Shipt also executed.
The arbitration agreement obligated the plaintiff and the defendants to resolve through mandatory, binding arbitration” “any and all disputes, claims, or controversies of any kind and nature between them.” The agreement also delegated to the arbitrator several threshold issues, including “disputes about whether any claims, controversies, or disputes between us are subject to arbitration” and “claims … regarding the scope, interpretation, validity, and enforceability of any Independent Contractor Arbitration Agreement or this Arbitration Agreement.” The defendants referred to these provisions as the “delegation clause.”
In addition, the agreement was “made pursuant to a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act.”
The plaintiff filed a complaint against the defendants styled as a “representative complaint for injunctive and declaratory relief, civil penalties, and other relief under PAGA.” The complaint alleged that Shipt “misclassified the plaintiff and other similarly situated workers as independent contractors and, in so doing, has violated multiple provisions of the Labor Code.” The plaintiff alleged to qualify as “an ‘aggrieved employee’” under PAGA because she was “employed by Shipt during the applicable statutory period and suffered the Labor Code violations alleged in the complaint.”
On these bases, the plaintiff alleged a single count for PAGA non-individual penalties. She claimed that she “brought this PAGA action on a representative, non-individual basis” and “in [her] representative capacity as an aggrieved employee on behalf of the state and all similarly aggrieved individuals subjected to the alleged violations.”
The plaintiff alleged her claim was typical of the claims of the others whom she sought to represent and that her claims were representative of and co-extensive with the claims of the other aggrieved individuals. She sought “non-individual civil penalties” and “non-individual injunctive and declaratory relief.” She also addressed the arbitration agreement, saying that because she alleged only non-individual PAGA claims on a representative basis, Shipt couldn’t compel them to arbitration.
The defendants filed a motion to compel arbitration of the individual part of the plaintiff's PAGA action and, under the delegation clause, any disputes regarding the enforceability of the arbitration agreement. In opposition, the plaintiff argued she hadn’t alleged any individual claims, and thus there was nothing to compel to arbitration. She didn’t respond to the defendants' argument that the agreement delegated to the arbitrator any questions regarding the arbitrability of disputes or the enforcement of the agreement. The defendants' motion further sought a stay of the litigation pending arbitration, which the plaintiff also opposed.
The trial court denied the motion on the basis that the action was solely a representative PAGA suit without any individual causes of action. As a result, the court had no individual cause of action to which it could compel to arbitration. This appeal followed.
Discussion
Presiding Judge Frances Rothschild explained that a PAGA plaintiff is acting in a representative capacity: by asserting a PAGA claim based on violations that employees other than those that the plaintiff has suffered. The defendants argued that the PAGA action included an individual PAGA claim on the plaintiff's behalf, and thus wasn’t, as the plaintiff contended and the trial court concluded, a PAGA action brought in a purely representative capacity on behalf of other employees. The Court of Appeal agreed.
A necessary component of every PAGA action is an individual PAGA claim, and thus the plaintiff, having alleged a cause of action under PAGA has, as a matter of law, alleged both an individual claim and a representative claim.
The plaintiff argued that another part of the statute trumped the plain meaning of this language and allows the individual employee the option of bringing only a representative claim. She pointed to language in section 2699 stating that civil penalties “to be assessed and collected by the [LWDA] … for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of the employee and other current or former employees against whom a violation of the same provision was committed.” But Judge Rothschild concluded that this language is referring to PAGA actions seeking civil penalties otherwise only recoverable by the LWDA as an alternative to the LWDA itself collecting those penalties.
The plaintiff also cited language in § 2699(k)(1) providing: “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 [PAGA].” The Court noted that, by its own terms, this refers to non-PAGA claims—i.e., “other remedies” besides those set forth in PAGA. It thus speaks to the right of a PAGA plaintiff to bring a non-PAGA individual claim or a class action claim seeking statutory penalties to compensate the plaintiff or class of plaintiffs—not civil penalties largely payable to the LWDA—in addition to a PAGA claim.
The Court of Appeal concluded that, based on the unambiguous language in § 2699(a), any PAGA action necessarily includes both an individual PAGA claim and a representative PAGA claim.
Judge Rothschild said that the Court recognized that the existence of an individual PAGA claim in every PAGA action; as such, that claim often may be separately compelled to arbitration where the FAA applies. That may trigger a stay of the litigation of the representative PAGA claim and even potentially affect the outcome of that litigation via issue preclusion. The judge added that statutory history supports the Court’s interpretation of what the Legislature intended.
The Court of Appeal reversed the trial court's order and directed the court to issue a new order compelling the parties to arbitrate the plaintiff's individual PAGA claim and staying litigation of the representative PAGA claim for an amount of time to be determined by the court. But again, the California Supreme Court has granted review of this case. Leeper v. Shipt, Inc. (California Court of Appeal, 2nd Appellate District 12/30/2024, review granted, (California Supreme Court 7/31/2025).
Bottom Line
PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of the State of California for Labor Code violations. Those who intend to pursue PAGA claims must follow specific requirements.
Check back to see what the California Supreme Court decides in this case.