Arbitration vs. PAGA Claims

In the landmark case of Iskanian v. CLS Transportation Los Angeles, LLC , the California Supreme Court said that an employer may “enforce an arbitration agreement that compels waiver of a class action, but cannot compel the employee to arbitrate a representative action under the Private Attorneys General Act (PAGA).” The one question the Iskanian ruling did not answer was whether the arbitration claim or PAGA takes priority. The Second District Court of Appeals in Los Angeles County answered this question in the case of Franco v. Arakelian Enterprises, Inc. in 2015.

Plaintiff Franco had signed an “Employee Agreement to Arbitrate” when he started working for Arakelian Enterprises. The agreement Franco signed said that both he and his employer had “forego[ne] and waive[d] any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity.” When Franco filed suit against Arakelian Enterprises for wage and hour claims and asked for a PAGA representative, his employer wanted to mandate arbitration. The trial court granted Arakelian Enterprises’ motion and ruled by saying that Franco must take his case to arbitration. When the case was remanded, the trial court refused to mandate arbitration. After the Supreme Court ruled on the Iskanian case, Franco’s case was turned to the Second District Appellate Court.

The Appellate Court reversed and remanded the trial court’s decision denying arbitration. However, since Franco wanted representative action PAGA, Franco may not be forced to arbitrate his PAGA claim. The case of Franco vs. Arakelian Enterprises was able to provide guidance on how Superior Courts should handle PAGA claims pending individual arbitration. PAGA claims will now stay in the court system until a decision has been reached in arbitration. The ruling on this case filled the gap in the Iskanian ruling and has clarified PAGA for both employers and employees.

Sources referenced:

  1. The National Law Review
  2. Kruis Mediation



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Rausch Mediation & Arbitration Services
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