Mejia v. Merchants Bldg. Maint., LLC
Mejia v. Merchants Bldg. Maint., LLC
Opinion of the Court
*725I.
INTRODUCTION
Defendants Merchants Building Maintenance, LLC and Merchants Building Maintenance Company (the MBM defendants) appeal from an order of the trial court denying their joint motion to compel arbitration. The MBM defendants moved to compel arbitration of a portion of plaintiff Loren Mejia's cause of action brought against them for various violations of the Labor Code under the Private Attorneys General Act of 2004 (PAGA) ( Lab. Code,
*726Pursuant to PAGA, "an 'aggrieved employee' may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. ( Lab. Code, § 2699, subd. (a).)" ( Arias v. Superior Court (2009)
The MDM defendants moved to compel arbitration of that portion of Mejia's PAGA claim in which she seeks "an amount sufficient to recover underpaid wages" pursuant to section 558. Section 558 provides in relevant part:
"(a) Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty as follows:
"(1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.
"(2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.
"(3) Wages recovered pursuant to this section shall be paid to the affected employee.
"[¶] ... [¶]
"(d) The civil penalties provided for in this section are in addition to any other civil or criminal penalty provided by law." (§ 558, subds. (a), (d).)
The MBM defendants contend that Mejia's claim to recover the portion of the penalty under section 558 that represents underpaid wages amounts to a claim for individual damages because it seeks "victim-specific relief," given that section 558 provides that any amount recovered representing the amount of underpaid wages are to be directed to "the affected employee."
*727The MBM defendants further contend that because Mejia agreed to arbitrate any individual claim that she may have to her unpaid wages, any claim that she asserts seeking the amount that is sufficient to recover underpaid wages under section 558 must be separated from the remainder of the PAGA claim and sent to arbitration.
The question presented in this case has been framed by other courts as a question as to whether a single PAGA claim seeking recovery of the civil penalty provided for in section 558 may be "split" in the way that the MBM defendants suggest. In other words, may a court split a single PAGA claim so as to require a representative employee to arbitrate that aspect of the claim in which the plaintiff seeks to recover the portion of the penalty that represents *65the amount sufficient to recover underpaid wages where the representative employee has agreed to arbitrate her individual wage claims, while at the same time retain in the judicial forum that aspect of the employee's claim in which the plaintiff seeks to recover the additional $50 or $100 penalties provided for in section 558 for each violation of the wage requirements? Appellate courts are divided on this question. (Compare Esparza v. KS Industries, L.P. (2017)
We agree with the conclusion of the Lawson and Zakaryan courts on this question, and conclude that a single PAGA claim seeking to recover section 558 civil penalties may not be "split" between that portion of the claim seeking an "amount sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or $100 per-violation, per-pay-period assessment imposed for each wage violation.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background
According to the President of Merchants Building Maintenance, LLC, it is "a maintenance company that primarily provides janitorial services." Merchants Building Maintenance Company "operates as a payroll and administrative services company for [Merchants Building Maintenance, LLC]." Mejia alleges that she and other aggrieved individuals were employed by the MBM defendants as nonexempt employees.
Mejia was a union member during her employment with the defendants. In 2016, Merchants Building Maintenance, LLC and Mejia's union entered into a collective bargaining agreement (CBA). The CBA was ratified by the bargaining-unit employees on May 1, 2016. A provision in the CBA requires that bargaining-unit employees resolve their private wage and hour disputes on an "individual basis" by following a mediation and arbitration protocol, which, pursuant to the terms of the CBA, is governed by the Federal Arbitration Act (FAA).
Mejia alleges that the defendants engaged in a number of Labor Code violations. Specifically, according to Mejia, (1) the defendants had a "policy and practice" of failing to provide employees with thirty-minute meal periods or provide compensation in lieu of the meal breaks; (2) the defendants did not permit or authorize Mejia and other employees to take "net 10-minute rest periods for every four hours worked" or provide compensation in lieu of the rest breaks; (3) the defendants did not pay her or other employees "all wages at the legal minimum and/or overtime rate" when the employees were required to work through their meal periods, and thereby failed to pay plaintiff and similar employees "for all hours worked"; (4) the defendants failed to provide her and other employees with "accurate itemized wage statements"; and (5) the defendants failed to timely pay Mejia and other former employees their final wages upon the employees' separation from employment.
B. Procedural background
Mejia filed a complaint against the MBM defendants asserting a single cause of action, pursuant to PAGA, to address these various Labor Code violations. Specifically, Mejia identifies the following Labor Code provisions as having been violated: sections 226.7 and 512 (failure to provide meal periods); sections 226.7 (failure to provide rest periods); sections 510, 1194, 1194.2, 1197, and 1198 (failure *730to pay legal minimum wage and/or overtime at the correct rate); sections 226 and 226.3 (failure to provide accurate itemized wage statements); and sections 201, 202, 203, 204, and 210 (failure to timely pay all earned wages owed upon separation from employment).
The MBM defendants moved to compel arbitration of one aspect of Mejia's PAGA claim, and requested a stay of the remaining aspects of Mejia's claim. Specifically, the MBM defendants sought an order compelling Mejia to arbitrate that portion of her PAGA claim in which, according to MBM, she sought "to recover victim-specific relief," i.e., "the unpaid wages that MEJIA claims were due her and which *67were allegedly unpaid by the MBM [defendants]." The MBM defendants argued that "the recovery available under Labor Code section 558 is unpaid wages and the right of recovery inures solely to the benefit of the employee and not to the State."
The trial court denied the motion to compel arbitration without stating its reasoning.
The MBM defendants filed a timely notice of appeal from the order denying their petition to compel arbitration.
III.
DISCUSSION
The MBM defendants challenge the trial court's refusal to order Mejia to arbitrate the portion of Mejia's PAGA claim that seeks to recover "an amount sufficient to recover underpaid wages" pursuant to section 558, subdivision (a). As noted, there is disagreement among courts as to whether that portion of a plaintiff's PAGA claim seeking the civil penalties of the "amount sufficient to recover underpaid wages" that are made available in section 558 may be split from the remainder of a plaintiff's PAGA claim for other civil penalties and sent to an arbitral forum. We now consider the issue.
A. Relevant legal standards
1. Standards on review from the court's ruling on the motion to compel arbitration
We agree with the Zakaryan court that the "arbitrability of a portion of a PAGA claim presents a legal question that lies at the intersection of California labor law and arbitration law," and that we therefore review the trial *731court's ruling on this issue de novo. ( Zakaryan , supra , 33 Cal.App.5th at p. 667,
2. Labor law enforcement
Traditionally, the Labor Code has provided several mechanisms allowing for the enforcement of the substantive protections for employees that are set forth in the Labor Code.
First, for example, an aggrieved employee may pursue a judicial action or administrative action on her own behalf: "[I]f 'an employer fails to pay wages in the amount, time or manner required by contract or by statute, the employee has two principal options. The employee may seek judicial relief by filing an ordinary civil action against the employer for breach of contract and/or for the wages prescribed by statute. (§§ 218, 1194.) Or the employee may seek administrative relief by filing a wage claim with the commissioner pursuant to a special statutory scheme codified in sections 98 to 98.8." ( Reynolds v. Bement (2005)
Regardless of the legal theory advanced, an employee's recovery for a private cause of action is limited to the amount the Legislature has determined is the appropriate amount to compensate the employee for the injuries that she has suffered, both economic and noneconomic, as a result of the employer's violation or *68violations. (See Murphy v. Kenneth Cole Productions, Inc. (2007)
Second, the Labor Commissioner may initiate proceedings against the employer and seek a variety of remedies. (See §§ 1193.6 [authorizing action for "unpaid overtime compensation"], 1194.5 [authorizing action for injunctive relief], 217 [authorizing action to recover penalties].) For example, with respect to violations of the overtime and meal and rest period *732rules, section 558 specifies the civil penalty that the Labor Commissioner may recover from an employer-i.e., an amount sufficient to recover the wages that were underpaid plus an additional $50 for the first violation against each employee for each pay period, and an additional $100 for any subsequent violation against each employee for each pay period. ( § 558, subd. (a).) Upon recovering civil penalties from an employer, the Labor Commissioner is directed to give that portion of the penalty that represents the "[w]ages recovered" under section 558 to the "affected employee" ( § 558, subd. (a)(3) ), while the remainder is to go to the Labor and Workforce Development Agency ( § 558, subd. (b) ; Iskanian , supra , 59 Cal.4th at p. 378,
Finally, under the scheme set forth in the Labor Code, a local prosecuting authority may prosecute an employer where the violations of certain provisions of the Labor Code are designated as misdemeanors (see, e.g., §§ 215, 216, 218) or infractions (see, e.g., § 226, subd. (c)).
In 2003, the Legislature created another mechanism for enforcing California's labor laws through the enactment of the PAGA. The Legislature recognized that enforcement authorities had insufficient incentive and resources to sue employers for Labor Code violations. ( Iskanian , supra , 59 Cal.4th at p. 379,
A PAGA action is " 'fundamentally a law enforcement action designed to *69protect the public and not to benefit private parties.' " ( Arias , supra , 46 Cal.4th at p. 986,
" '[E ]very PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee-the plaintiff bringing the action-or as to other employees as well, is a representative action on behalf of the state.' " ( Iskanian , supra , 59 Cal.4th at p. 387,
3. The intersection between arbitration law and PAGA
Private parties, including employers and employees, may contractually agree to resolve their disputes through arbitration. ( Rent-A-Center, W., Inc. v. Jackson (2010)
In Iskanian , supra ,
B. Analysis
Whether the trial court erred in denying the MBM defendants' motion to compel Mejia to arbitrate turns on whether a PAGA claim that seeks to recover the remedies available to the Labor Commissions pursuant to section 558 may (or should) be split into two separate claims based on the two aspects of the relief that is recoverable pursuant to section 558 -i.e., a claim for the $50 and $100 per-pay-period penalties and a claim for that portion of the penalty that represents an amount sufficient to recover underpaid wages. Under the MBM defendants' theory, Mejia is seeking "victim-specific recovery for herself" when she requests that portion of the section 558 penalty that constitutes "an amount sufficient to recover underpaid wages." The MBM defendants contend that for this reason, this aspect of Mejia's claim should be split from the remainder of her section 558 PAGA claim and sent to arbitration while the $50 and $100 portion of the penalties sought for all aggrieved employees would constitute a separate claim for a collective *735remedy and could remain in court.
MBM has provided us with no reason to deviate from the Thurman court's conclusion that it is the monetary assessments together with the "amount sufficient to recover underpaid wages" provided for in section 558 that comprises a single civil penalty. Section 558, by its very terms, provides for the imposition of a civil penalty that consists of two components-"fifty dollars ($50) for each underpaid employee for each pay period ... in addition to an amount sufficient to recover underpaid wages," or, for subsequent violations, "one hundred dollars ($100) for each underpaid employee for each pay period ... in addition to an amount sufficient to recover underpaid wages." (§ 588, subd. (a), italics added.)
*72The fact that one of these two components is not a predetermined amount, but, *736rather, is an amount directly proportional to the scope of wage violation at issue, does not alter the fact that the two components jointly comprise a single civil penalty. In this way, section 588, subdivision (a)'s reference to the "amount sufficient to recover underpaid wages" provides a method of measurement for determining the amount of the civil penalty that is to be imposed, and not a reference to the recovery of the individual employees' actual unpaid wages.
Again, the Labor Commissioner is the party entitled to recover the civil penalty set forth in section 558, subdivision (a) ; individual employees are not granted a private right of action to obtain section 558 penalties. (See, e.g., Thurman , supra , 203 Cal.App.4th at p. 1148,
It is only because of a different statute- section 2699, subdivision (a) -that an aggrieved employee may seek to recover the civil penalties provided for in section 558. (See Thurman , supra , 203 Cal.App.4th at p. 1148,
Specifically, as the Zakaryan court recently explained, the primary *73rights theory demonstrates why such "splitting" of a PAGA claim for section 558 penalties is impermissible. (See Zakaryan , supra , 33 Cal.App.5th at pp. 671-672,
A primary right is defined neither by the legal theory asserted ( Cal Sierra Development, Inc. v. George Reed, Inc. (2017)
When the Labor Commissioner commences an administrative or judicial action against an employer for wage violations, the Commissioner is seeking to vindicate the state's right to be free from injury resulting from violations of the labor laws. Thus an aggrieved employee who asserts a PAGA claim for wage violations is stepping into the shoes of the Labor Commissioner and seeking to "vindicat[e] one and only one 'particular injury'-namely, the injury to the public that the 'state labor law enforcement agencies' were *738created to safeguard." ( Zakaryan , supra , 33 Cal.App.5th at p. 672,
We reject the MBM defendants' contention that the opinions in Broughton v. Cigna Healthplans (1999)
Thus, for example, the Broughton court determined that an individual plaintiff's claim, brought pursuant to the Consumers Legal Remedies Act (CLRA) ( Civ. Code, § 1750 et seq. ) could be split into two and decided in two different fora. Specifically, that portion of the plaintiff's claim seeking relief in the form of damages under the CLRA could be sent to arbitration and that portion of the plaintiff's claim seeking injunctive relief to "enjoin[ ][the defendant's allegedly] deceptive [methods, acts and] practices" was to remain in court. ( Broughton , supra , 21 Cal.4th at pp. 1079-1084,
It is clear that the courts in Broughton and Cruz sanctioned so-called "claim splitting"
*75because the CLRA and UCL claims at issue in those cases involved two primary rights: (1) the individual plaintiff's right to be made whole through damages or restitution that was created through the CLRA and UCL statutory schemes themselves, and (2) the public's right to be protected from deceptive and/or wrongful practices through a "public injunction" sought by the individual plaintiff "act[ing] in the purest sense as a private attorney general." ( Cruz , supra , 30 Cal.4th at p. 312,
In contrast, a plaintiff who brings a single PAGA claim always acts in one capacity-as the proxy or agent of the state-and an action under PAGA is " 'fundamentally a law enforcement action designed to protect the public and not to benefit private parties.' " ( Arias , supra , 46 Cal.4th at p. 986,
To the extent that the MBM defendants rely on the premise that "[t]he relief for unpaid wages under section 558 is payable 100% to the individual employee" for their contention that a claim for that aspect of the section 558 penalty is truly one for "victim-specific relief," we disagree with this premise. Rather, we conclude that the PAGA rule of allocation of the civil penalty recovery-75 percent to the Agency and 25 percent to the aggrieved employees-applies when an aggrieved employee files a PAGA action, despite the provision in section 558 that provides that the full portion of the penalty that represents the amount reflective of the underpaid wages is to be allocated to "the affected employee[s]" (see § 588, subd. (a)(3)). In our view, section 558 was enacted to authorize the Labor Commissioner to recover penalties for wage violations, and it provides the rule for allocation of the penalties *741recovered when the Labor Commissioner is the party enforcing the Labor Code and recovering the civil penalties available as a result of an employer's violations of the wage rules. *76Thus, when the Labor Commissioner recovers the civil penalties available pursuant to section 558, the Labor Commissioner is to retain the per-pay-period $50 or $100 portion of the penalties and the Labor Commissioner is to share with the employees who suffered the wage violations that portion of the penalties that represents the amount of their underpaid wages.
However, with the enactment of PAGA, a new set of rules came into existence that apply when someone other than the Labor Commissioner seeks to enforce the provisions of the Labor Code. As the statute animating an aggrieved employee plaintiff's claim, PAGA provides the overarching procedural rules governing that claim, including a provision outlining precisely how civil penalties obtained through a PAGA action are to be distributed once recovered. Specifically, PAGA provides that "civil penalties recovered by aggrieved employees shall be distributed as follows : 75 percent to the Labor and Workforce Development Agency ... and 25 percent to the aggrieved employees." ( § 2699, subd. (i), italics added.) Since PAGA was enacted after section 558 (and after the enactment of many of the Labor Code provisions that provide for the recovery of other civil penalties by the Labor Commissioner), the Legislature is presumed to have been aware of the Labor code's penalty provisions (see People v. Superior Court (Zamudio ) (2000)
A PAGA claim is, fundamentally, a representative claim. PAGA allocates 25 percent of the civil penalties recovered to the "aggrieved employees" to give individual employees an incentive to sue on the agency's behalf, and not as a means of awarding "victim-specific relief." ( Whitworth (N.D.Cal. 2018)
The MBM defendants nevertheless argue that Mejia "did not need to invoke PAGA to allege unpaid wages claims under those statutes [that grant employees a private right of action, some of which underlie Mejia's PAGA claim] ... to recover her victim-specific damages for those statutory *743violations." They assert that if Mejia had "sought to sue solely in her own individual capacity for those alleged violations, she would have been required to arbitrate those unpaid wages claims," and argue that "by artful pleading," Mejia is being permitted to "assert a non-PAGA claim ... in an attempt to avoid arbitration." However, the fact that an aggrieved employee has the choice to bring a PAGA claim, rather than to assert a claim based on her private right of action, is beyond dispute. As previously discussed, an aggrieved employee who desires to pursue judicial relief for her employer's violation of the overtime or meal and rest period rules (as opposed to administrative relief) has the option of (1) filing a lawsuit asserting a claim in her individual capacity based on a private cause of action (see §§ 1194, 218); (2) filing a lawsuit asserting a PAGA claim in a representative capacity on behalf of the state (see § 2699 ); or (3) filing a lawsuit asserting both an individual claim and a PAGA claim. If the employee chooses the first or third option, the employee may obtain and keep for herself all of the underpaid wages she may recover in pursuing her private right of action; but in choosing either of these options, the employee's personal claim for Labor Code violations is subject to arbitration if the employee has agreed to arbitrate her personal claims. (§§ 1194, 218; *78Iskanian , supra , 59 Cal.4th at p. 391,
DISPOSITION
The order of the trial court denying the MBM defendants' motion to compel arbitration is affirmed. Mejia is entitled to costs on appeal.
WE CONCUR:
BENKE, Acting P. J.
HUFFMAN, J.
Further statutory references are to the Labor Code unless otherwise indicated.
Although not entirely clear, the MBM defendants' argument appears to be that Mejia may seek only the amount of unpaid wages that represents her own underpaid wages, and that she cannot bring a claim seeking an amount representing the underpaid wages of other employees, even in an arbitral forum. Although the MBM defendants do not expressly explain the basis of their position in this regard, we understand the MBM defendants to be contending that the portion of Mejia's claim in which she seeks amounts sufficient to recover the underpaid wages of all affected employees pursuant to section 558 must be limited to a claim for only her own underpaid wages due to the existence of a collective bargaining agreement between the parties that provides that employees agree to resolve their wage and hour claims on an individual basis.
Other cases also agree that a single PAGA claim may not be split into two claims, with only a "portion" of a PAGA claim being sent to arbitration. (See Williams v. Superior Court (2015)
Although the Lawson and Zakaryan courts reached the same conclusion that we reach here, they disagreed as to one aspect regarding the allocation of any civil penalties recovered by a PAGA plaintiff. (See Zakaryan , supra , 33 Cal.App.5th at p. 677,
The court did not rule on the related request for a stay of the remaining aspects of Mejia's claim, effectively denying the request.
Section 558 authorizes "only ... the Labor Commissioner to recover the penalties," and does not provide a private right of action allowing individual employees to seek their unpaid wages as damages. (Atempa v. Pedrazzani (2018)
As explained in Iskanian , "[a] PAGA representative action is therefore a type of qui tam action. 'Traditionally, the requirements for enforcement by a citizen in a qui tam action have been (1) that the statute exacts a penalty; (2) that part of the penalty be paid to the informer; and (3) that, in some way, the informer be authorized to bring suit to recover the penalty.' [Citation.] The PAGA conforms to these traditional criteria, except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation." (Iskanian , supra , 59 Cal.4th at p. 382,
Again, throughout their briefing, the MBM defendants repeatedly refer to Mejia as seeking her own "underpaid wages," and not any amounts representing the underpaid wages of other employees. Although not expressly stated, we assume that this is based on the existence of the CBA, which limits employees to bringing only individual claims for wage relief.
Further, we are not convinced that the language of a separate Labor Code provision, section 1197.1, subdivision (c), is helpful in understanding what the Legislature meant when it defined the "civil penalty" in section 558, subdivision (a) as involving both the $50 or $100 per violation amount as well as an amount equal to the underpaid wages. Section 1197.1, subdivision (c) provides for the posting of a bond by any petitioner who seeks a writ of mandate from a finding by the Labor Commissioner that an assessment of a "civil penalty, wages, liquidated damages, and any applicable penalties imposed pursuant to Section 203" (§ 1197.1, subd. (c)(1)) is due. (See § 1197.1, subd. (c)(1), (c)(2), (c)(3).) Subdivision (c)(3) provides in relevant portion: "As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the Labor Commissioner equal to the total amount of any minimum wages, liquidated damages, and overtime compensation that are due and owing as determined pursuant to subdivision (b) of Section 558, as specified in the citation being challenged. The bond amount shall not include amounts for penalties." Although on a first reading one might view this provision as distinguishing between "minimum wages" that are due pursuant to section 558 and the "penalties" that might be due under section 558, we think such a reading would be inaccurate. Specifically, subdivision (c)(3) of section 1197.1 refers to subdivision (b) or section 558, which does not define or otherwise refer to the "civil penalty" set forth in subdivision (a) of section 558. Rather, subdivision (b) of section 558 provides:
"If upon inspection or investigation the Labor Commissioner determines that a person had paid or caused to be paid a wage for overtime work in violation of any provision of this chapter, any provision regulating hours and days of work in any order of the Industrial Welfare Commission, or any applicable local overtime law, the Labor Commissioner may issue a citation. The procedures for issuing, contesting, and enforcing judgments for citations or civil penalties issued by the Labor Commissioner for a violation of this chapter shall be the same as those set out in Section 1197.1."
Thus, section 1197.1, subdivision (c)(3)'s reference to section 558 is highlighting the authorization provided to the Labor Commissioner in that section to "issue a citation" for violations of that chapter-a chapter that sets forth rules regarding workweeks, overtime pay and meal periods-similar to the authorization in section 1197.1, subdivision (b) that permits the Labor Commissioner to issue citations for civil penalties, liquidated damages, and other applicable penalties imposed pursuant to section 203. The fact that the Legislature decided not to require that the bond amount provided for in section 1197.1, subdivision (c)(3) include "amounts for penalties" does not provide any insight as to whether the Legislature intended for those "penalties" to comprise the $50 or $100 per-pay-period penalty amount plus an amount equal to underpaid wages or the $50 or 100 per-pay-period penalty amounts, alone.
This is not the only instance in the Labor Code in which the Labor Commissioner is authorized to recover a civil penalty that will vary because it reflects the wages involved in the violation at issue. (See § 256 ["The Labor Commissioner shall impose a civil penalty in an amount not exceeding 30 days pay as waiting time under the terms of Section 203"].)
On this point, we diverge from the Thurman court's conclusion that section 558 's statement that the amount representing the underpaid wages is to go to the affected employees is an "exception" to the general PAGA rule that civil penalties recovered in a PAGA action are distributed 75 percent to the LWDA and 25 percent to the aggrieved employees. (See Thurman , supra , 203 Cal.App.4th at p. 1147,
Reference
- Full Case Name
- Lorena MEJIA, and v. MERCHANTS BUILDING MAINTENANCE, LLC, and
- Cited By
- 2 cases
- Status
- Published