Filed 10/26/20 Aguirre v. Prudential Overall Supply CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

ENEDINA AGUIRRE,

Plaintiff and Respondent,

v.

PRUDENTIAL OVERALL SUPPLY,

Defendant and Appellant.

G057980

(Super. Ct. No. 30-2019-01057911)

O P I N I O N

Appeal from an order of the Superior Court of Orange County, Glenda Sanders, Judge. Affirmed. Motion for sanctions denied.

Hill, Farrer & Burrill, James A. Bowles and Elissa L. Gysi for Defendant and Appellant.

Protection Law Group, Heather Davis, Amir Nayebdadash and Priscilla Gamino for Plaintiff and Respondent.

* * *

Prudential Overall Supply (Prudential) appeals from an order denying its motion to compel arbitration of Enedina Aguirre’s complaint for wage and hour violations under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA). Finding no error, we affirm the trial court’s order.

FACTS

Prudential is in the business of providing uniforms, apparel, restroom products, cleaning supplies, and linens to businesses for rent, lease, or purchase; it also provides clean room services for computers. In 2016, Prudential hired Aguirre as an office manager for its facility in Vista, California. On the first day of her employment, Aguirre signed an Agreement to Arbitrate in which she agreed to submit any claims related to her employment to final and binding arbitration conducted “under the Federal Arbitration Act and the procedural rules of the American Arbitration Association.” She further agreed “to forego any right [she] may have had to a jury trial” and “to forego any right to bring claims on a representative or class member basis.”

In 2019, Aguirre filed a representative action on behalf of herself and “other aggrieved employees,” asserting a single cause of action under PAGA based on Prudential’s alleged wage and hour violations. Prudential filed a motion to compel arbitration and stay the action. The trial court denied that motion, reasoning “PAGA claims cannot be compelled to arbitration.” This appeal followed.

DISCUSSION

Prudential contends the trial court misinterpreted California case law on the arbitrability of PAGA claims. It further asserts the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) preempts any rule barring the arbitration of PAGA claims. Because Prudential’s arguments present purely legal issues, we review the matter de novo. (Hernandez v. Ross Stores, Inc. (2016) 7 Cal.App.5th 171, 176.) We are not bound by the trial court’s reasoning and may affirm its ruling “on any correct legal theory supported by the record.” (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 864 (Julian).)

1. An Overview of PAGA and Whether PAGA Claims Are Arbitrable

Before turning to Prudential’s arguments, we review what PAGA is and how courts have interpreted its provisions. By way of background, “California’s Labor Code contains a number of provisions designed to protect the health, safety, and compensation of workers. Employers who violate these statutes may be sued by employees for damages or statutory penalties. [Citations.] . . . [Citation.] Several Labor Code statutes [also] provide for additional civil penalties, generally paid to the state unless otherwise provided.” (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 80 (Reins).) Before PAGA’s enactment in 2004, only the state could sue for civil penalties. (Ibid.) This “proved problematic. As to criminal violations, local prosecutors often directed their resources to other priorities. [Citation.] The Labor Commissioner and other agencies were likewise hampered in their enforcement of civil penalties by inadequate funding and staffing constraints.” (Id. at p. 81)

The Legislature addressed these problems by enacting PAGA, which allows aggrieved employees, acting as private attorneys general, to recover the civil penalties that previously were recoverable only by the state’s labor law enforcement agencies. (Reins, supra, 9 Cal.5th at p. 81; see § 2699, subd. (a).) “‘Of the civil penalties recovered, 75 percent goes to the Labor and Workforce Development Agency, leaving the remaining 25 percent for the “aggrieved employees.”’” (Reins, at p. 81; see § 2699, subd. (i).)

Importantly, “[a] PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties. An employee suing under PAGA ‘does so as the proxy or agent of the state’s labor law enforcement agencies.’ [Citation.] Every PAGA claim is ‘a dispute between an employer and the state.’” (Reins, supra, 9 Cal.5th at p. 81.) “Moreover, the civil penalties a PAGA plaintiff may recover on the state’s behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations. [Citation.] Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action. [Citations.] ‘A PAGA representative action is therefore a type of qui tam action,’ conforming to all ‘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.’ [Citation.] The ‘government entity on whose behalf the plaintiff files suit is always the real party in interest.’” (Ibid.)

In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), our Supreme Court explained that “an employee’s right to bring a PAGA action is unwaivable.” (Id. at p. 383.) Thus, held the court, a provision in an employment agreement waiving the employee’s right to bring a representative PAGA action “in any forum” is contrary to public policy and therefore unenforceable. (Id. at pp. 360, 383.)

Our Supreme Court has never expressly addressed the enforceability of an employee’s predispute agreement to arbitrate PAGA claims. Numerous California appellate courts have considered the issue, however, and have uniformly held such an agreement is not enforceable without the state’s consent. (See Bautista v. Fantasy Activewear, Inc. (2020) 52 Cal.App.5th 650, 655 (Bautista) [“arbitration agreements entered into before a plaintiff has been deputized for purposes of a PAGA representative action [are] not enforceable for purposes of the PAGA representative action”]; Collie v. Icee Co. (2020) 52 Cal.App.5th 477, 480 (Collie) [“an employee cannot be compelled to arbitrate a PAGA cause of action on the basis of a predispute arbitration agreement”]; Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 624 625 (Correia) [a PAGA “claim cannot be compelled to arbitration based on an employee’s predispute arbitration agreement absent some evidence that the state consented to the waiver of the right to bring the PAGA claim in court”]; Julian, supra, 17 Cal.App.5th at p. 860 [“an agreement to arbitrate a PAGA claim, entered into before an employee is statutorily authorized to bring such a claim on behalf of the state, is an unenforceable predispute waiver”]; Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439, 449 (Betancourt), review den. May 24, 2017 [“while a PAGA action might be subject to arbitration, relying on a predispute agreement with a private party will not suffice to compel arbitration of a PAGA claim”]; Tanguilig v. Bloomingdale’s, Inc. (2016) 5 Cal.App.5th 665, 678 (Tanguilig), review den. Mar. 1, 2017 [“Because a PAGA plaintiff . . . acts as a proxy for the state only with the state’s acquiescence (see § 2699.3) and seeks civil penalties largely payable to the state via a judgment that will be binding on the state, a PAGA claim cannot be ordered to arbitration without the state’s consent”].)

“[T]hese courts reasoned that because the state is the real party in interest in a PAGA action and a PAGA plaintiff asserts the claim solely on behalf of, and as the proxy for, the state, the employee’s predispute arbitration agreement does not subject the claim to arbitration because the state never agreed to arbitrate the claim.” (Correia, supra, 32 Cal.App.5th at pp. 621-622.) “Under these decisions, predispute arbitration agreements generally do not support the compelled arbitration of PAGA claims because the state retains control of the right underlying the employee’s PAGA claim at least until the state has provided the employee with implicit or explicit authority to bring the claim. [Citation.] At that point, an employee’s waiver of the trial right and an agreement to arbitrate may be enforceable. [Citation.] But before that time, the employee has no authority or authorization to waive the state’s rights to bring the state’s claims in court.” (Id. at p. 622.)

2. The Arbitrability of Aguirre’s PAGA Claim

Against this backdrop, we turn to Prudential’s current motion to compel arbitration. Prudential contends the trial court should have enforced the Agreement to Arbitrate and ordered Aguirre’s PAGA claim to arbitration. Given the authorities summarized above and the language of the parties’ Agreement to Arbitrate, we cannot agree.

To start, the Agreement to Arbitrate expressly states Aguirre agreed “to forego any right to bring claims on a representative . . . basis.” (Italics added.) Of course, this PAGA waiver provision is unenforceable under Iskanian, supra, 59 Cal.4th at p. 359, but the provision’s existence nevertheless confirms the parties never agreed to arbitrate PAGA claims. (See id. at p. 391 [arbitration agreement containing a representative action waiver “gives us no basis to assume that the parties would prefer to resolve a representative PAGA claim through arbitration”].)

Further, even if the parties had agreed to arbitrate PAGA claims, we would not enforce such an agreement in this case. As noted above, California appellate courts have uniformly concluded a PAGA “claim cannot be compelled to arbitration based on an employee’s predispute arbitration agreement absent some evidence that the state consented to the waiver of the right to bring the PAGA claim in court.” (Correia, supra, 32 Cal.App.5th at pp. 624-625, fn. omitted.) This rule makes sense, considering “the state is the real party in interest” in a PAGA action, and any judgment “is binding on the government.” (See Iskanian, supra, 59 Cal.4th at p. 387.)

Prudential asks us to depart from these cases, asserting they were wrongly decided because the courts “did not yet have the benefit of the guidance provided by the Supreme Court in ZB.” But ZB provides no “guidance” on the arbitrability of PAGA claims. Prudential’s argument is premised largely on a single sentence from ZB, in which the court stated “[a]n employee’s predispute agreement to individually arbitrate her claims is unenforceable where it blocks an employee’s PAGA claim from proceeding.” (ZB, supra, 8 Cal.5th at p. 198, italics added.) According to Prudential, the italicized language means PAGA claims are not categorically exempt from arbitration. We are not persuaded. This sentence simply reiterates Iskanian’s holding that PAGA waivers in predispute arbitration agreements are unenforceable. (See Iskanian, supra, 59 Cal.4th at p. 384.) It does not endorse arbitrating PAGA claims without the state’s consent. (Cf. Reins, supra, 9 Cal.5th at pp. 82, 92, fn. 7 [noting without comment that the employer “acknowledged that the PAGA claim could not be . . . arbitrated” and “had to be stayed in superior court while the [non PAGA] claims were arbitrated”].)

There is no evidence here that the state agreed to arbitrate Aguirre’s PAGA claim. Because Prudential cannot enforce the Agreement to Arbitrate against a nonparty, the trial court correctly denied Prudential’s motion to compel arbitration.

3. FAA Preemption

Prudential alternatively contends the FAA requires us to compel Aguirre’s PAGA claim to arbitration. Again, we disagree. True, the FAA compels judicial enforcement of a wide range of written arbitration agreements (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 111), and when the FAA applies, it preempts any state law rule that “‘stand[s] as an obstacle to the accomplishment of the FAA’s objectives.’” (Iskanian, supra, 59 Cal.4th at p. 384.) But as our Supreme Court has explained, “a PAGA claim lies outside the FAA’s coverage because it 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.” (Id. at pp. 386-387.) “[T]he 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, and that is no less true when such a claim is brought by a statutorily designated proxy for the agency as when the claim is brought by the agency itself.” (Id. at p. 388.)

For these reasons, Aguirre’s PAGA claim is not subject to the FAA, and our holding does not run afoul of the FAA’s protections. (See also Collie, supra, 52 Cal.App.5th at pp. 482 483 [rule that employee cannot be forced to arbitrate PAGA claim does not run afoul of FAA]; Correia, supra, 32 Cal.App.5th at p. 618 [post-Iskanian decisions by United States Supreme Court do not invalidate Iskanian’s holding on FAA preemption].)

4. Sanctions

Finally, Aguirre asks us to impose over $28,000 in sanctions against Prudential’s counsel for filing a frivolous appeal. (See Cal. Rules of Court, rule 8.276.) We decline her request. California case law on employment arbitration agreements and PAGA is evolving, and Prudential’s arguments, while unsupported by California case authority, found at least some support in conflicting federal authority. The appeal was not frivolous.

DISPOSITION

We affirm the order denying the motion to compel arbitration. Aguirre shall recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).) Aguirre’s sanctions motion is denied.

GOETHALS, J.

WE CONCUR:

ARONSON, ACTING P. J.

THOMPSON, J.