In an effort to avoid arbitrating individual claims under the Private Attorneys General Act (“PAGA”), a recent trend emerged in California litigation involving “headless” PAGA lawsuits. Essentially, plaintiffs would expressly disclaim bringing individual PAGA claims, and instead, assert “representative-only” PAGA claims. The distinction is significant, because if there is no individual PAGA claim, there is nothing to arbitrate, and the parties may proceed to litigating the representative PAGA claim in court.  Employers often prefer arbitration because it offers greater confidentiality for the dispute, faster, and more cost-effective way to resolve disputes.

However, on December 30, 2024, the California Court of Appeal for the Second Appellate District put a stop to these “headless” PAGA lawsuits (at least for now) by holding in Leeper v. Shipt, Inc. that every PAGA action necessarily includes an individual PAGA claim.

PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of the State of California for Labor Code violations.  In June 2022, the United States Supreme Court held in Viking River Cruises, Inc. v. Moriana that individual PAGA claims may be arbitrated if an employee entered an enforceable arbitration agreement. In July 2023, the California Supreme Court held in Adolph v. Uber Technologies, Inc. that while an individual PAGA claim may be arbitrated, an employee does not lose standing to maintain a representative PAGA claim in court when arbitration is compelled as to the individual PAGA claim.  In other words, while an employee’s individual PAGA claim may be compelled to arbitration, an employee may still also proceed in court with a representative PAGA claim.  In practice, however, and consistent with Adolph, California courts often stay representative PAGA claims until the arbitration as to the individual PAGA claim is completed.

In the underlying lawsuit, Christina Leeper (“Leeper”) filed a single PAGA complaint for “non-individual penalties” on a “representative, non-individual basis.” She alleged that because she was only bringing “non-individual PAGA claims on a representative basis, Shipt cannot compel them to arbitration.”

Leeper relied on Balderas v. Fresh Start Harvesting, Inc. to support her position that a plaintiff may properly allege only a representative PAGA claim. However, the Court rejected her argument stating that Balderas only addressed PAGA standing issues, and “Balderas did not have occasion to discuss, did not discuss, and its holding does not address, whether a plaintiff may carve out an individual PAGA claim from a PAGA action.”

Leeper also relied on Kim v. Reins Int’l Cal., Inc. and Adolph v. Uber Technologies, Inc. to support her interpretation of the PAGA statute. However, the Court held that Kim only addressed the question of standing (i.e., whether employees had standing to pursue a claim under PAGA if they settle and dismiss their individual claims for Labor Code violations), and similarly, Adolph also only addressed the requirements for PAGA standing (i.e., Plaintiff’s individual PAGA claim component could be adjudicated via arbitration without the Plaintiff losing standing to pursue the remaining representative PAGA claim). Neither cases discussed the distinct issue of what claims a PAGA action necessarily involves.

Instead, the Court held that the language of the PAGA statute, which states that PAGA claims may be brought “on behalf of the employee and other current or former employees” is unambiguous and provides that any PAGA action includes an individual claim by the inclusion of the word “and” which is conjunctive, and not disjunctive. Therefore, Leeper’s PAGA complaint also contained individual PAGA claims, which must be compelled to arbitration, while the representative PAGA claim is stayed.

The Court’s ruling is a win for employers in California. However, like anything involving PAGA, more litigation is likely to follow. Ballard Spahr’s Labor and Employment Group has significant experience representing companies against PAGA claims, including making sure their wage and hour policies are compliant with the California Labor Code, and assisting in drafting California compliant arbitration agreements. Please contact us if you have any questions.