Can a PAGA claim be bound by an agreement between private parties to arbitrate?

Betancourt v. Prudential Overall Supply (Court of Appeal of California)

Plaintiff Betancourt filed a PAGA claim against Prudential Overall Supply in 2015 citing failure to pay overtime, failure to provide rest and meal periods, failure to pay minimum wage, failure to pay timely wages during employment and upon termination, failure to keep complete and accurate payroll records and failure to reimburse necessary business-related expenses and costs.  Prudential filed a motion to compel arbitration of the PAGA case, which the trial court denied.  Prudential then appealed to the Court of Appeals of California.

Prior to Plaintiff filing a PAGA claim in 2015, in 2006, Prudential explained their Motion to Compel Arbitration to Betancourt, who had no opportunity to negotiate his terms nor read the agreement.  In the Motion to Compel, the Agreement stated that Betancourt would forego any right to bring claims on a representative or class basis, and would submit to arbitration.  Prudential, in 2015, claimed that Betancourt was attempting to evade this Agreement. 

The trial court held that a PAGA claim is not subject to an agreement to arbitrate between private parties, as a PAGA claim is brought on behalf of the state, by an employee, against an employer.  Betancourt is suing Prudential on behalf of the state, under the California Private Attorney General Act (PAGA), and therefore Prudential cannot rely on the pre-dispute agreement from 2005 with Betancourt to compel the state to resolve via arbitration.  Because of this, the Court of Appeals held that the trial court was correct in denying Prudential’s motion to compel arbitration.  

The right to bring PAGA claims cannot be waived by an employer.  In a PAGA claim, the state is the real party at interest.  A PAGA plaintiff may agree and consent to arbitration but cannot be bound by a pre-dispute contract between private parties, as this contract cannot bind the state to arbitration. 

Application: A PAGA claim is brought by a plaintiff on behalf of the state of California and cannot be bound by an agreement between private parties to arbitrate, as the state is not a party to this agreement. 

**This ruling is different in federal court in the case Valdez v. Terminix International Co. Ltd. Partnership.