Labor Code compliance is more important now than ever for California employers.
The Private Attorneys General Act of 2004 (“PAGA”) has been causing headaches for California employers for many years. This state law allows aggrieved employees to file lawsuits for Labor Code violations on behalf of themselves, other employees, and the State of California. Last week the California Supreme Court ruled that an employee may litigate their representative PAGA claims (those brought on behalf of other employees and the State) in court, even when the individual PAGA claim is compelled to arbitration.
The good news is that employers may continue to enforce arbitration agreements for individual PAGA claims, and representative claims may be placed on hold until after the completion of the arbitration proceedings. In the event the arbitrator determines that the employee did not suffer any wage and hour violations, then the employee would lose standing to proceed with their representative claim.
The importance of compliance with the Labor Code is crucial to denying employees the opportunity to proceed with representative PAGA claims. In addition, employers with arbitration agreements should review these agreements to ensure they contain the appropriate language regarding PAGA claims and arbitration.