Valdez v. Terminix finds that PAGA claims can be arbitrated.

Valdez v. Terminix International Co. Ltd. Partnership (Ninth Circuit Appeal)

The district court denied a motion to dismiss or compel arbitration of Plaintiff Valdez’s PAGA claim.  Terminix appealed the decision by the district court, insisting that the district court should have dismissed the PAGA claim because the Federal Arbitration Act (FAA) obstructs California’s Iskanian rule.  The Federal Arbitration Act serves to enforce the validity and enforceability of arbitration awards, to be held to the same standard as judicial decisions. However, the Iskanian rule does not require a PAGA claim to solely be pursued in a judicial forum, and only states that a complete waiver of the right to file a PAGA claim is invalid.  Therefore, the Court holds that the Iskanian rule is not an obstacle to the Federal Arbitration Act, as it does not require a PAGA claim to be sought in a judicial setting, and holds that arbitration is a valid means of resolution. 

Terminix also argued that the district court erred in deciding that PAGA claims cannot proceed to arbitration, which the Ninth Circuit Appeal Court does agree with.  An individual employee can pursue a PAGA complaint in arbitration, and in this way an individual employee can bind the state to the arbitration award, subject to the FAA.  Since PAGA claims are eligible to be arbitrated, and Valdez’s PAGA claim falls under a state employment related law, the case could proceed to arbitration.  Therefore, the Ninth Circuit Appeals Court reversed the decision of the lower court and sent the case back to the district court.**

Application: An arbitration award has the same legal standing as a judicial decision.  PAGA claims can be arbitrated and maintain the same standing as a PAGA complaint that is brought to trial in a judicial setting.     

**This decision is especially fascinating because it is different than the rule in Betancourt that also deals with PAGA jurisdiction, that determined in court that PAGA Plaintiff cannot be bound by a pre-dispute contract between private parties, as this contract cannot bind the state to arbitration.