Many recent California court decisions addressing arbitration of Private Attorney General Act (“PAGA”) claims have focused on issues of federal preemption, public policy, and statutory intent. A recent California decision throws in a new variable – contractual intent – establishing that even arbitration agreements with technically proper language, may be unenforceable if the agreement’s terminology is outdated.
Quick Background: Iskanian, Viking River, and Adolph
For years, California employers have looked to arbitration agreements as a tool to manage the volume and cost of PAGA litigation. But for nearly a decade, Iskanian v. CLS Transportation Los Angeles, LLC (2014), was treated as a hard stop on compelling any part of a PAGA claim to arbitration.
In 2022, the U.S. Supreme Court disrupted that framework in Viking River Cruises, Inc. v. Moriana creating a path—at least in theory—for employers to compel arbitration of an employee’s individual PAGA component and attempt to resolve threshold issues quickly (including whether the named plaintiff is an “aggrieved employee”). The California Supreme Court then weighed in with Adolph v. Uber Technologies, Inc. (2023) (CDF’s blog on Adolph can be found here) confirming that even when an individual claim is compelled to arbitration, the representative PAGA claim generally is not dismissed and may remain pending in court. Since then, California courts have seen an ongoing wave of arguments testing the outer boundaries of what can—and cannot—be compelled to arbitration in a post-Viking River world.
LaCour Turns on Contract Intent (Not Headless PAGA)
While California employers continue to watch for the Supreme Court’s guidance in Leeper v. Shipt, Inc. regarding whether every PAGA action necessarily includes an individual component, courts are already deciding cases on narrower grounds. This month, the California Court of Appeal, First Appellate District, declined to compel arbitration in LaCour v. Marshalls of California, LLC, focusing not on unsettled “headless PAGA” questions, but on a more basic issue: the language of the arbitration agreement and the parties’ intent at the time it was signed.
In LaCour, the employee executed the arbitration agreement in 2014—years before Viking River, Adolph, and the terminology and framework those decisions introduced. The agreement itself contained the following clauses:
“[The [parties] agree to bring any dispute in arbitration on an individual basis only and not on a class, collective or private attorney general representative action basis…. There will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action…The [PAGA Waiver] shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the [PAGA Waiver] is invalid, unenforceable, revocable, unconscionable, void or voidable. IN such instances and where the claim is brought as a private attorney general claim, such private attorney general claim must be litigated in a civil court of competent jurisdiction.”
The Court acknowledged that Marshalls’ interpretation might have been more persuasive if the Viking River framework had existed at the time, but it did not. As the Court effectively reasoned, the parties could not have intended to divide and compel a PAGA claim based on standards, definitions, and nomenclature that were not part of the legal landscape in March 2014. On that basis, the Court concluded the agreement did not support compelling arbitration the way the employer sought, finding that the parties could not have intended that outcome when they signed the agreement.
Practical Takeaway: Update Arbitration Agreements Regularly
LaCour is a reminder that even well-drafted arbitration agreements can become vulnerable when the law evolves in ways the agreement’s language did not (and could not) anticipate. That risk is only increasing as PAGA and arbitration precedent continues to shift. Similar to employee handbooks, employers should review arbitration agreements on an annual basis (at the least) and also consider reviewing them after major court decisions, to ensure the agreement reflects current law, uses current terminology, and clearly expresses the parties’ intent regarding their implementation.
