California’s class action and Private Attorneys General Act (PAGA) landscape remains in flux, shaped by a continuous stream of appellate activity and statutory developments. One of the most significant—and increasingly complex—issues in the current environment involves the role of arbitration agreements in PAGA litigation.
This area has become particularly active following the California Court of Appeal’s decisions in Leeper v. Shipt, Inc. and Parra Rodriguez v. Packers Sanitation Services Ltd., LLC, cases that have deepened the divide between state and federal interpretations of PAGA’s procedural structure.
The Ongoing Tension: Arbitration and Representative Actions
Leeper v. Shipt, Inc., decided by the California Court of Appeal, Second Appellate District, on December 30, 2024, reaffirmed the principle that a PAGA action necessarily includes an individual component, even when the plaintiff purports to disclaim it. In that case, the plaintiff attempted to bring a “headless” PAGA claim—seeking only penalties on behalf of other employees while disclaiming her own individual claim in an effort to avoid arbitration. The court rejected that approach, holding that every PAGA claim is derivative of Labor Code violations sustained by the plaintiff and, therefore, cannot be wholly severed from the plaintiff’s individual status.
This decision aligned with the reasoning in Viking River Cruises, Inc. v. Moriana, the U.S. Supreme Court’s 2022 opinion, which held that while the Federal Arbitration Act (FAA) preempts California law to the extent it bars arbitration of individual PAGA claims, non-individual PAGA claims may be dismissed once the individual component is compelled to arbitration. However, the California Supreme Court’s response in Adolph v. Uber Technologies, Inc. complicated matters by concluding that plaintiffs do not lose standing to pursue non-individual PAGA claims simply because their individual claims are ordered to arbitration.
Adding to the complexity, the California Court of Appeal, Fourth Appellate District, issued a decision on February 26, 2025, in Parra Rodriguez v. Packers Sanitation Services Ltd., LLC. In this case, the plaintiff filed a PAGA complaint in a representative capacity only, expressly disclaiming any individual claims. The employer moved to compel arbitration of the plaintiff’s individual PAGA claim, but the trial court denied the motion, finding no individual claim had been asserted to compel to arbitration. The Fourth District affirmed this decision, emphasizing that it is the plaintiff’s prerogative to define the scope of their claims and that courts should not infer individual claims where none are pleaded. This ruling creates a split with the Leeper decision regarding the necessity and arbitrability of individual PAGA claims within representative actions.
Employment counsel on both sides are now navigating a patchwork framework in which:
- Arbitration agreements may be enforceable as to the individual portion of a PAGA claim.
- Standing to pursue representative claims may still survive the compelled arbitration of the individual claim.
- Trial courts must decide whether to stay the representative action or allow it to proceed in parallel.
- The interpretation of whether a PAGA action must include an individual claim varies between appellate districts, leading to inconsistent applications of the law.
The Resulting Procedural Landscape
The outcome of this evolving framework is a procedurally fragmented and often unpredictable litigation process. When courts compel arbitration of the individual component of a PAGA claim, the representative portion may be stayed or delayed—creating significant practical challenges for both sides.
In many cases, this bifurcation means the individual claim must be arbitrated first, potentially holding up resolution of the PAGA action. If the plaintiff prevails in arbitration, they may be entitled to a separate recovery before proceeding with the representative PAGA claims. This sequential structure can create a litigation “nightmare” in terms of time, cost, and case management—particularly when the representative claims remain active in court.
Recognizing these complications, many parties opt to mediate the entire dispute during or even before arbitration proceedings begin. This approach allows for a more efficient global resolution that can encompass both the individual and representative claims, reducing the risk of duplicative litigation and inconsistent outcomes.
Broader Implications for PAGA Settlements
The ripple effects of this judicial back-and-forth are already manifesting in settlement negotiations. Parties considering resolution must evaluate:
- Whether the release of PAGA claims is enforceable where standing is contested.
- How courts may treat global settlements where multiple representative actions are pending.
- Whether bifurcation of individual and representative claims leads to inefficiencies that discourage early settlement.
Another challenge arises in overlapping PAGA actions filed by different employees against the same employer. The decision in Moniz v. Adecco USA, Inc. by the California Court of Appeal underscored that non-party employees typically do not have standing to object to or intervene in another PAGA action, even where their claims overlap. This has implications for settlement finality, res judicata arguments, and the coordination of concurrent litigation.
California’s PAGA and class action environment continues to evolve at the intersection of arbitration, representative standing, and procedural design. For employment lawyers, the current moment offers both challenges and opportunities: challenges in navigating inconsistent authority and complex motion practice, and opportunities in shaping efficient resolution strategies and advocating for clearer judicial guidance. Regardless of perspective, the need for clarity remains a shared concern in an area of law that affects thousands of California workplaces each year.
About the Author
Steven G. Mehta is a leading mediator in California with extensive experience resolving complex employment disputes, including wage and hour class actions and PAGA cases. He is known for his balanced, pragmatic approach and has successfully mediated thousands of matters across the state.