A Quick History on Labor Laws and Why They're Important in the Uber Lawsuit

II.

The Legislature enacted PAGA almost two decades ago in response to widespread violations of the Labor Code and significant underenforcement of those laws. (See Arias v. Superior Ct. (2009) 46 Cal.4th 969, 980 (Arias); Assem. Com. on Labor & Employment, Analysis of Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended July 2, 2003, p. 3 (Assembly Labor Committee Analysis).) Before PAGA’s enactment, tools for enforcing the Labor Code were limited. Some statutes allowed employees to sue their employers for damages resulting from Labor Code violations such as unpaid wages. (Kim, supra, 9 Cal.5th at p. 80; Iskanian, supra, 59 Cal.4th at p. 381.) Other Labor Code violations were punishable only as criminal misdemeanors, which local prosecutors tended not to prioritize. (Iskanian, at p. 379.) Additionally, several statutes provided civil penalties for Labor Code violations, but only state labor law enforcement agencies could bring an action for civil penalties and those agencies lacked sufficient enforcement resources. (Ibid.; Assembly Labor Committee Analysis, at pp. 3–4.)

To address these shortcomings, the Legislature enacted PAGA to create new civil penalties for various Labor Code violations and “ ‘to allow aggrieved employees, acting as private attorneys general, to recover [those] penalties.’ ” (Iskanian, supra, 59 Cal.4th at p. 379.) An employee who brings a PAGA action to recover civil penalties acts “ ‘as the proxy or agent’ ” of the state. (Iskanian, at p. 380; see § 2699, subd. (a).) “PAGA is designed primarily to benefit the general public, not the party bringing the action.” (Kim, supra, 9 Cal.5th at p. 81.) Penalties recovered are dedicated largely “to public use . . . instead of being awarded entirely to a private plaintiff.” (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended May 12, 2003, p. 5 (Assembly Judiciary Committee Analysis); see § 2699, subd. (i) [75% of civil penalties go to the LWDA, 25% go to aggrieved employees].)

To have standing to bring a PAGA action, a plaintiff must be an “aggrieved employee,” which the statute defines as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” (§ 2699, subd. (c).) An aggrieved employee becomes deputized to prosecute Labor Code violations once he or she has complied with PAGA’s notice requirements. (§ 2699.3, subd. (a).) Before filing suit, the aggrieved employee “must notify the employer and the [LWDA] of the specific labor violations alleged, along with the facts and theories supporting the claim.” (Kim, supra, 9 Cal.5th at p. 81, citing § 2699.3, subd. (a)(1)(A).) “If the agency does not investigate, does not issue a citation, or fails to respond to the notice within 65 days, the employee may sue.” (Kim, at p. 81, citing § 2699.3, subd. (a)(2).) “The notice requirement allows the relevant state agency ‘to decide whether to allocate scarce resources to an investigation’ ” (Kim, at p. 81) or instead to deputize the aggrieved employee to pursue sanctions on the state’s behalf. Once deputized, the aggrieved employee has authority to “seek any civil penalties the state can.” (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 185 (ZB).)

A PAGA claim for civil penalties “ ‘ “is fundamentally a law enforcement action.” ’ ” (ZB, supra, 8 Cal.5th at p. 185.) “The ‘government entity on whose behalf the plaintiff files suit is . . . the real party in interest.’ ” (Kim, supra, 9 Cal.5th at p. 81.) PAGA’s default civil penalties are thus calculated “ ‘to punish the employer’ for wrongdoing” (ZB, at p. 185) and “ ‘to deter violations’ ” (Iskanian, supra, 59 Cal.4th at p. 379) rather than “compensate employees for actual losses incurred” (ZB, at p. 186). PAGA claims are subject to a one-year statute of limitations. (Code Civ. Proc., § 340, subd. (a).) The LWDA must be provided with prior notice of any proposed settlement, and any final settlement requires approval by the trial court. (§ 2699, subd. (l)(2).) “Because an aggrieved employee’s action under [PAGA] functions as a substitute for an action brought by the government itself, a judgment in that action binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government.” (Arias, supra, 46 Cal.4th at p. 986.)

In Iskanian, we held that a predispute categorical waiver of the right to bring a PAGA action is unenforceable (Iskanian, supra, 59 Cal.4th at pp. 382–383) — a rule that Viking River left undisturbed (see Viking River, supra, 596 U.S. at pp. –, __– __ [142 S.Ct. at pp. 1922–1923, 1924–1925] [the FAA does not preempt this rule]). We explained that such waivers violate California public policy and Civil Code sections 1668 and 3513. (Iskanian, at pp. 383–384, quoting Civ. Code, § 1668 [prohibiting contractual waivers, whether “direct[] or indirect[],” that “exempt any one from responsibility for his own . . . violation of law”] and Civ. Code, § 3513 [“a law established for a public reason cannot be contravened by a private agreement”].)

In addition, Iskanian held unenforceable an agreement that, while providing for arbitration of alleged Labor Code violations sustained by the plaintiff employee (what Viking River called individual claims), compels waiver of claims on behalf of other employees (i.e., non-individual claims). (Iskanian, supra, 59 Cal.4th at p. 384; see Viking River, supra, 596 U.S. at p. __ [142 S.Ct. at p. 1916].) We explained that “whether or not an individual claim is permissible under the PAGA, a prohibition of representative [i.e., non-individual] claims frustrates the PAGA’s objectives.” (Iskanian, at p. 384; see ibid. [“[W]here . . . an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.”].) Viking River also left this rule intact. (Viking River, at p. __ [142 S.Ct. at p. 1925] [“Under our holding in this case [requiring enforcement of agreements to arbitrate individual claims, Moriana’s non-individual] claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.”]; see Nickson v. Shemran, Inc. (2023) 90 Cal.App.5th 121, 306 (Nickson) [Viking River did not disturb Iskanian’s rule that an arbitration agreement purporting to waive an employee’s non-individual claims is unenforceable as a matter of state law]; Seifu v. Lyft, Inc. (2023) 89 Cal.App.5th 1129, 1139 (Seifu) [same]; Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281, 1288 (Piplack) [same]; Gregg v. Uber Technologies, Inc. (2023) 89 Cal.App.5th 786, 797 (Gregg) [same]; Mills v. Facility Solutions Group, Inc. (2022) 84 Cal.App.5th 1035, 1062–1064 [same].)

Following our decision in Iskanian, various courts held that employers may not require employees to “split” PAGA actions in a manner that puts individual and non-individual components of a PAGA claim into bifurcated proceedings. (See, e.g., Perez v. U-Haul Co. of California (2016) 3 Cal.App.5th 408, 420–421; Williams v. Superior Court (2015) 237 Cal.App.4th 642, 649.) Viking River held that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Viking River, supra, 596 U.S. at p. __ [142 S.Ct. at p. 1924].) “The ‘principal purpose’ of the FAA is to ‘ensur[e] that private arbitration agreements are enforced according to their terms.’ ” (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344.) The high court explained that an anti-splitting rule “unduly circumscribes the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate,’ [citation], and does so in a way that violates the fundamental principle that ‘arbitration is a matter of consent.’ ” (Viking River, at p. __ [142 S.Ct. at p. 1923].) Requiring parties to adjudicate a PAGA action entirely in one proceeding, the high court said, “compels parties to either go along with an arbitration in which the range of issues under consideration is determined by coercion rather than consent, or else forgo arbitration altogether. Either way, the parties are coerced into giving up a right they enjoy under the FAA.” (Viking River, at p. __ [142 S.Ct. at p. 1924].) Thus, Viking River requires enforcement of agreements to arbitrate a PAGA plaintiff’s individual claims if the agreement is covered by the FAA.