May 12, 2023

Helping Employers Traverse the PAGA Jungle: Key Takeaways

Navigating the Private Attorneys General Act (PAGA) landscape can be overwhelming for California employers. To help employers stay updated on the ever-evolving statute, this article highlights key takeaways from our recent presentation, “Helping Employers Traverse the PAGA Jungle.” A recording of the full presentation can be viewed here.

How Should Employers Handle Multiple PAGA Cases?

When multiple plaintiffs file overlapping PAGA actions, employers can try to consolidate the cases into a single action or stay the second-filed case. Consolidation is often preferred because it leaves only a single action remaining, but it can only be ordered if both cases are pending in the same court. If consolidation is not possible, employers can seek to stay the second-filed action on one (or both) of two separate grounds: (1) a plea in abatement (Cal. Code Civ. Proc. § 597), which allows the first court having jurisdiction over a dispute to bar any other court from exercising jurisdiction over actions in which the parties, causes of action, and issues are identical; or (2) exclusive concurrent jurisdiction, a judge-made doctrine, which allows the same outcome but does not require that the parties, causes of action, or remedies sought be absolutely identical.

Should Employers Settle PAGA Claims?

When considering whether to settle PAGA claims, employers should consider the complications of compelling arbitration, the risks of delaying settlement until after arbitration, the pros and cons of settling individual versus group PAGA claims, and the procedural details of the trial court’s role in settlement approval. The safer, but more expensive, settlement course is to settle the action with the entire group of aggrieved employees. A riskier, but likely cheaper, course is to settle with an individual plaintiff. The second choice means trusting the plaintiff won’t refile a PAGA claim, and/or that opposing counsel won’t find another employee to bring an identical PAGA claim.

How Should Employers Adjust Arbitration Agreements?

 Employers should consider making the following changes when updating their arbitration agreements:

1. Carve out claims for sexual assault and sexual harassment from mandatory arbitration.

Although not a PAGA-related development, this should be addressed when updating arbitration agreements due to recent changes in federal law. Pre-dispute agreements to arbitrate sexual harassment or sexual assault claims are no longer valid or enforceable. Employers should review existing pre-dispute agreements, employee handbooks, and other written policies to ensure they do not include provisions for, or references to, mandatory arbitration of sexual harassment or assault claims.

2. Remove any language regarding “voluntariness” from arbitration agreements for new employees, or when reissuing arbitration agreements for current employees, if desired.

California’s requirement that arbitration agreements expressly state that they are voluntary is preempted by the Federal Arbitration Act (FAA). Employers with agreements governed by the FAA can remove this language from its agreements moving forward.

3. Add a waiver of the right to bring a class or representative action.

This will make it more likely that the individual PAGA claim is arbitrated.

4. Add a severance clause.

Even though the Supreme Court ruled that a trial court can dismiss a plaintiff’s non-individual PAGA claims, the California state appellate courts have disagreed. Employers should add severance agreement language, ideally that is specific to PAGA.

5. Add stay language.

Trial courts appear to be sending individual PAGA claims to arbitration and retaining representative claims in court. Adding stay language to the arbitration agreement may help to ensure that litigation of representative actions is stayed until the resolution of an individual claim.

6. Roll out new arbitration agreements carefully.

If your company’s arbitration agreement is very old, it makes sense to roll out a new arbitration agreement to all employees. If only minor tweaks are made to the arbitration agreement, use it for new hires, or for employees who have been promoted.

What’s Next?

Employers should expect the volume of PAGA cases to continue accelerating in the near future. Employers can prepare for the onslaught by keeping an eye on new developments in the law, tightening up wage and hour practices, and updating arbitration agreements.

Disclaimer: Please contact your Payne & Fears attorney for current guidance on the subject matter of this article.