At first, those of us representing California employers believed we finally got some good news dealing with PAGA claims when the Court of Appeals, Second District came out with its ruling in Leeper v. Shipt on December 30, 2024. In Leeper, the court ruled that every PAGA case necessarily includes an individual action, and as such, employers can compel arbitration of the individual component of a PAGA case even if the plaintiff did not specifically allege individual PAGA violations. Leeper, a former employee of Shipt, filed a PAGA action against Shipt in her solely in her representative capacity without alleging an individual component to the PAGA claims. Essentially, she claimed that Shipt committed various labor code violations against its California employees, but purposefully did not allege that Shipt’s purported labor code violations caused her harm as an individual employee. In foregoing her individual claims, Plaintiff hoped to avoid arbitration of her claims pursuant to the arbitration agreement she signed during her employment with Shipt. Her strategy was based on the California Supreme Court’s holding in Adolph v. Uber Technologies, in which the Court held that only individual PAGA claims were arbitrable. Relying on the Adolph holding, she argued that because she is not pursuing individual claims, Shipt cannot compel any portion of her PAGA claims to arbitration. When Shipt moved to compel arbitration, Plaintiff argued that her arbitration agreement did not apply because she did not seek any individual claims against Shipt as she chose to abandon her own individual PAGA claim.

The trial court agreed with the Plaintiff and denied Shipt’s motion to compel arbitration. Shipt appealed and the Court of Appeals reversed; confirming that the plain language of the PAGA statue requires a PAGA action to be brought by an aggrieved employee on behalf of the employee AND other current or former employees. The court clarified that the word “and” in the statute requires all PAGA actions to be brought on both an individual and representative basis. As such, it specifically limited the Balderas v. Fresh Start Harvesting, Inc. holding regarding a plaintiff’s “standing” to bring PAGA claims, indicating that in Balderas, the court did not endorse a plaintiff’s ability to excise their individual claim from PAGA actions. The court’s decision in Leeper does not conflict with Balderas but rather clarifies Balderas’ implicitly recognized notion that a representative complaint under PAGA includes both components (individual and representative). Leeper confirmed that by statute, every PAGA claim includes both an individual and representative claim and, thus, a plaintiff cannot choose to abandon the individual component to avoid arbitration.

However, shortly after Leeper case, the Fourth Appellate District in Rodriguez v. Packers Sanitation came up with an opposite ruling, indicating that a complaint that does not seek relief for a plaintiff’s individual PAGA claims does not “inherently” include plaintiff’s individual claims. Rather, the court indicated that if the complaint does not allege any individual claims, then the court cannot compel arbitration as there are no individual claims. Specifically, the court stated that on a motion to compel arbitration, the court is required to determine whether the plaintiff has asserted claims that fall within the parties’ arbitration agreement. The court left it open for employers to challenge the complaint due to pleading deficiencies, indicating that if the defendant files a motion raising such a challenge and the court grants it with leave to amend, the plaintiff will then have to decide if it is going to add the individual PAGA claim. Essentially, the court in Rodriguez is making employers jump through another hoop to get the trial court to force plaintiff to add the requisite individual claim in order to compel arbitration. Frankly, it is an unnecessary extra step for employers as it is clear from the Leeper case that the individual claims are “inherent” to the PAGA representative claims. Making employers spend more resources to ultimately get what the Leeper court ruled regarding inherent individual PAGA claims.

For employers, the decision in Leeper clarifies that employers who have arbitration agreements can move to compel an employee’s individual PAGA claims to arbitration. However, if it is only a representative complaint, Rodriguez forces employers to challenge the face of the complaint at the outset of litigation to force plaintiffs to add individual PAGA claims. Practically speaking, this means every PAGA complaint needs to be scrutinized to see if the complaint includes individual PAGA claims for the plaintiff. If not, then the employer must timely challenge the complaint on deficiency for not pleading an individual PAGA claim. Otherwise, employers risk waiving the right to compel arbitration of plaintiff’s individual PAGA claim.

Although PAGA claims on behalf of the represented employees may not be forced to arbitration, the existence of an individual PAGA claim in every PAGA action means this claim often may be separately compelled to arbitration where the FAA applies, which may trigger a stay of the litigation of the representative PAGA claim and even potentially affect the outcome of the litigation via issue preclusion. Therefore, the Leeper and Rodriguez decisions have consequences that may ultimately affect the trajectory of the entire PAGA case.