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April 10, 2017 Practice Points

PAGA Claimants May Be Compelled to Arbitrate

By Gail Jankowski

Terminix appealed from a district court order denying its motion to compel arbitration of a former employee's representative claim under California's Private Attorneys General Act (PAGA). The claim alleged that Terminix failed to provide its employees with proper breaks, payment, and pay stubs.

On appeal, the Ninth Circuit reversed and remanded, finding persuasive Terminix's argument that the district court erred in concluding that PAGA claims categorically cannot proceed to arbitration. In its order denying Terminix's motion to compel arbitration, the district court reasoned that a PAGA claim "belongs to the state, and the state has not waived the judicial forum" even where an employee signs an employment contract requiring arbitration of PAGA claims. The Ninth Circuit disagreed and found that individual employees can bind the state to arbitration. Specifically, the panel reasoned "[a]n individual employee, acting as an agent for the government, can agree to pursue a PAGA claim in arbitration" and clarified that the California Supreme Court's Iskanian ruling holds only that a complete waiver of the right to bring a PAGA claim is invalid.

Having found that PAGA claims are eligible for arbitration, the panel went on to find that the PAGA claim at issue constituted a covered dispute since it related to the plaintiff's employment relationship with Terminix and arose under a state employment-related law. Accordingly, the Ninth Circuit reversed the portion of the district court's order denying Terminix's motion to compel arbitration. Valdez v. Terminix Int'l Co. Ltd. P'ship, No.15-56236 (9th Cir. Mar. 3, 2017).

Keywords: Private Attorneys General Act, PAGA, agent, waiver, employment

Gail Jankowski is an associate at Carlton Fields in Washington, D.C.

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