The June 2022 U.S. Supreme Court decision in Viking River Cruises, Inc. v. Moriana – 142 S.Ct. 1906 – was a landmark decision in favor of California employers, on the vigorously contested issue of the right to agree to arbitration of labor code disputes with employees. But many employment law attorneys predicted that California appellate courts would limit Viking River in various ways, and tip the scales back in favor of employees. A new California appellate case partially published this week, may be the first case, of potentially many,in that anticipated scale tip.
Eleni Gavriiloglou brought a civil action against her former employer Prime Healthcare Management. She alleged individual claims for damages based on several Labor Code violations, such as overtime pay etc., and a representative claim for civil penalties for Labor Code violations under the Private Attorneys General Act (Lab. Code, § 2698 et seq.), (PAGA).
Gavriiloglou had signed an arbitration agreement, thus the trial court compelled her to arbitrate her non-PAGA claims and stayed her PAGA claim while she did. The parties selected an arbitrator jointly.The arbitrator found that the alleged Labor Code violations had not occurred.
The trial court then granted judgment on the pleadings against Gavriiloglou on her PAGA claim; it ruled that the arbitrator’s findings established that she was not an “aggrieved employee” within the meaning of PAGA, and therefore that she lacked standing to bring a PAGA claim.
The Court of Appeal reversed and held that the arbitration did not bar the PAGA claim because Gavriiloglou was acting in different capacities and asserting different rights in the partially published case of Gavriiloglou v Prime Healthcare Management Inc., E076832 (September 2022).
Gavriiloglou made four arguments in her favor including that preclusion did not apply because she was acting in different capacities in the arbitration and in the litigation of the PAGA claim. The Court of Appeal did not discuss three of the four, since they said that this argument alone was dispositive of the issue.
Prime cited the U.S. Supreme Court decision in Viking River Cruises, Inc. v. Moriana – 142 S.Ct. 1906 – which they say distinguished between an “individual PAGA claim,” which it defined as a claim for Labor Code violations suffered by the plaintiff employee, and a “representative PAGA claim,” which it defined as a claim for Labor Code violations suffered by other employees. (Id. at p. 1916.) It then held that the Federal Arbitration Act preempts a state-law rule that precludes the arbitration of an individual PAGA claim separately from a representative PAGA claim. (Id. at pp. 1923-1926.).
In Prime’s view, Viking River “explicitly recognizes an individual claim under PAGA . . . .” The Court of Appeal disagreed and responded by saying this “is mere wordplay. What the Supreme Court called, as shorthand, an “individual PAGA claim” is not actually a PAGA claim at all. It would exist even if PAGA had never been enacted. It is what we are calling, more accurately, an individual Labor Code claim.”
Prime also argues that reversing the trial court conflicts with the 2009 California Supreme Court decision in Arias v. Superior Court, 46 Cal.4th 969. Prime characterizes Arias as holding “that issue preclusion can apply to the result of the PAGA action even as to non-PAGA claims. Arias held that “with respect to the recovery of civil penalties, nonparty employees as well as the government are bound by the judgment in an action brought under the act.” In other words, the PAGA plaintiff’s capacity is not controlling.” The Court of Appeal rejected this argument as well.
The Court of Appeal said that according to the Restatement (Second) of Judgments, section 36(2), “[a] party appearing in an action in one capacity, individual or representative, is not thereby bound by or entitled to the benefits of the rules of res judicata in a subsequent action in which he appears in another capacity.” And “California follows this rule.”
In conclusion the Court of Appeal said “in the arbitration, Gavriiloglou was litigating her own individual right to damages for Labor Code violations, whereas in the present PAGA action, she is litigating the state’s right to statutory penalties for Labor Code violations. It follows that the arbitrator’s findings cannot have preclusive effect.”
On September 15, 2022, the California Labor Commissioner requested publication of the non-published opinion which was originally filed this August. The Court of Appeal agreed that portions of the opinion meet the standard for publication as specified in California Rules of Court, rule 8.1105(c). Hence this case is partially published so that certain provisions become controlling California law.