Wage and Hour Case Notes

• Jurisdiction: California,United States
• Author: By Leonard H. Sansanowia
• Publication year: 2019
• Citation: Vol. 33 No. 4

Wage and Hour Case Notes

By Leonard H. Sansanowia

Leonard H. Sansanowicz is a senior associate with Feldman Browne Olivares, APC and represents employees in all aspects of employment law. He has been a Southern California Rising Star each year since 2013 and in 2015 was named to the Up-and-Coming 100 list. He can be contacted at: leonard@leefeldmanlaw.com.

PAGA Claims May Not Be Split; Wage Component Cannot Be Compelled to Arbitration

Zakaryan v. The Men's Wearhouse, Inc., 33 Cal. App. 5th 659 (2019)

Plaintiff, a store manager for defendant, filed a representative action under the Labor Code Private Attorneys General Act of 2004 (PAGA) for misclassifying all store managers as exempt and failing to pay overtime, meal period, and rest period premium wages (as well as derivative claims for inaccurate wage statements and waiting time penalties). Defendant moved to compel plaintiff's individual damages claims to arbitration. Plaintiff brought an action under Labor Code § 558, which, in addition to a $50/$100 penalty per aggrieved employee per pay period, also provides for an amount sufficient to recover underpaid wages. The issue before the court of appeal was whether plaintiff's share of the wage component could be compelled to arbitration. The court recognized a split of authority, with Esparza v. KS Indus., L.P.¹ holding wage component claims could be severed and sent to arbitration, and Lawson v. ZB, N.A.² holding they could not. (Lawson has since been granted review by the California Supreme Court, S246711, March 21, 2018, and currently is pending.) Zakaryan sided with Lawson (noting its overwhelming support by the weight of authority) and held such claims could not be compelled to arbitration, although for slightly different reasons. After reviewing PAGA's legislative purpose—concluding, as did Iskanian v. CLS Transp. Los Angeles, LLC,³ that PAGA claims are not matters of private dispute and therefore not subject to arbitration under the Federal Arbitration Act (FAA) — Zakaryan held that splitting a PAGA claim was both impermissible under the primary rights doctrine and inconsistent with existing law.

Under the primary rights doctrine, a "primary right" is a plaintiff's right "to be free from the particular injury suffered." The same primary right can be at stake even when there are two separate actions for the same harm involving the same parties. Splitting a PAGA claim violates this core principle, since the action is for a single "particular injury" suffered by the public. Zakaryan reinforces that the individual representative plaintiff's "personal claim" for underpaid wages is not at issue in a PAGA action; representative plaintiffs may bring an action for PAGA as well as their own individual claims, and PAGA actions do not have preclusive effect on other aggrieved employees from bringing their own individual actions.

The appellate court further noted three reasons why splitting a PAGA claim would contravene California's wage and hour protections. First, the plain language of the statute suggests it is a single civil penalty, albeit with two components.⁴ Second, a PAGA action is a representative action that imposes penalties for violation of state labor laws. The portion of the penalties in a PAGA action awarded to the aggrieved employees (25%) is designed to incentivize more private citizens to step forward as private attorneys general and prosecute claims on behalf of California rather than Iskanian "victim-specific relief" for private grievances; splitting the civil penalty on those grounds undermines the legislative purpose of the statute and contravenes existing case law. Third, an employee is welcome to file an action for her individual claims in lieu of a PAGA action, but if she chooses to file a representative action only, splitting the claim in two undermines what she originally elected to do and renders her decision meaningless.

The Zakaryan court also held that the amount recovered to satisfy underpaid wages had to be split 75%-25% between the State and all aggrieved employees, rather than with the individual employees directly, which seemingly contradicts the direct language of the statute: "Wages recovered pursuant to this section shall be paid to the affected employee."⁵ Perhaps the California Supreme Court will resolve this issue, too, when it decides Lawson.

Class Arbitration is Unavailable Unless Specified in the Arbitration Agreement

Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019)

[Page 11]

The United States Supreme Court extended its interpretation of "silence" as to classwide arbitration in an arbitration agreement, as first contemplated in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,⁶ finding that parties may only be compelled to class arbitration if they expressly agreed to such a term. In the wake of Epic Systems Corp. v. Lewis⁷ and its concept of "traditional individualized arbitration," the high court...