Ninth Circuit Rules That Only Individual PAGA Claims Can Be Compelled to Arbitration
On May 10, 2024, the Ninth Circuit decided Yuriria Diaz v. Macy’s West Stores, after the employer appealed the district court’s decision ordering arbitration of both an employee’s individual and non-individual claims under the California Private Attorney Generals Act (PAGA). The Ninth Circuit held that even though the arbitration agreement made no mention of PAGA, an employee’s individual PAGA claim was still subject to arbitration because the parties’ intended to arbitrate all employment disputes between them. However the non-individual PAGA claims were not arbitrable, because the parties did not consent to arbitration of those claims.
In Yuriria, the parties’ agreement prohibited class and collective actions, and required arbitration of all employment-related disputes. The plaintiff filed a PAGA action against her former employer alleging various violations of the California Labor Code, and the employer filed a motion to compel arbitration. The employer argued that under Viking River Cruises, the court should compel arbitration of the employee’s individual PAGA claim and dismiss the remaining, non-individual, claims. The employee argued that because the agreement made no mention of PAGA it could not cover her PAGA claims at all.
The district court rejected both parties’ arguments and struck its own path. It held that because a PAGA claim is an employment dispute, and the arbitration agreement encompassed all employment disputes, it necessarily included the entire PAGA claim – both its individual and non-individual components. The agreement in Yuriria contained class and collective action waivers. However, it did not contain a PAGA waiver unlike the agreement at issue in Viking River Cruises. In reaching its decision, the district court relied heavily on the distinctions between class and PAGA actions the Supreme Court highlighted in Viking River Cruises. Those distinctions, the court held, meant that the class action waiver, which prohibited arbitration of class actions, could not serve as a basis to prohibit arbitration of non-individual PAGA claims. The district court ordered the plaintiff to arbitrate her individual and non-individual PAGA claims, and dismissed the matter. The employer appealed.
The Ninth Circuit agreed with the district court and the employer that the employee’s individual PAGA claim was arbitrable, but reversed as to its finding the non-individual PAGA claims were arbitrable. The Ninth Circuit found that the individual PAGA claims fell within the scope of the agreement, based on the agreement’s repeated references to the employee herself and disputes “relating to [her] employment.” For the same reason, the Ninth Circuit found that the non-individual claims were not covered by the agreement. The Ninth Circuit explained that the term “class or collective action” could not be treated like a “fixed algebraic variable” that necessarily excluded PAGA actions, and that instead, courts must look to the parties intent. Here, the Ninth Circuit found there was no indication the parties consented to arbitration of the non-individual PAGA claims. Instead, the agreement’s repeated references to the employee’s individual disputes with the employer, coupled with the exclusion of class and collective actions from arbitration, showed that the parties only agreed to arbitrate claims relating to the employee’s own employment, and not that of others. The Ninth Circuit concluded that “[a]lthough the waiver does not specifically reference non-individual PAGA claims, it does no violence to the agreement to read non-individual PAGA claims as an instance of a class or collective action.”
The Ninth Circuit noted the arbitration agreement required the employee, as the party who filed a lawsuit raising both arbitrable and non-arbitrable claims, to request a stay of litigation for the non-arbitrable claims pending arbitration of the arbitrable claims. Accordingly, the Ninth Circuit ordered the district court on remand to anticipate that the parties will, per their agreement, request a stay of the non-arbitrable non-individual PAGA claims.
Yuriria is a welcome development for employers in the constantly-changing legal landscape after Viking River Cruises. Most arbitration agreements pre-date Viking River Cruises and make no mention of PAGA waivers. Yuriria instructs that courts should not only compel individual PAGA claims to arbitration and refuse to compel non-individual PAGA claims, but should do so even where an agreement makes no mention of PAGA at all.
