Rodriguez v. Lawrence Equipment, Inc.: Employee Lacks Standing to Pursue Representative PAGA Claim After Loss in Arbitration

Background

Julian Rodriguez began working for Lawrence Equipment, Inc. in 1999. In July 2014, Rodriguez signed an arbitration agreement that required him to arbitrate employment-related disputes. Rodriguez was terminated in October 2015.

In December 2015, Rodriguez filed a class action lawsuit against the company, alleging multiple violations of the Labor Code, as well as a violation of the PAGA, seeking to recover penalties on behalf of a large group of other allegedly “aggrieved employees.” Lawrence Equipment moved to compel arbitration. The trial court granted the motion, ordered Rodriguez’s individual claims to arbitration, and stayed the representative PAGA claim pending the outcome of the arbitration. The class claims were later dismissed for unrelated reasons.

In February 2018, the arbitration was decided entirely in favor of Lawrence Equipment. The arbitrator found that Rodriguez had failed to provide sufficient evidence to support any of his claims. Thereafter, in June 2018, the trial court affirmed the arbitration award and dismissed all of Rodriguez’s claims except for the representative PAGA claim. Rodriguez appealed the order confirming the arbitration award, but the appeal was denied.

Lawrence Equipment then moved for judgment on the pleadings as to Rodriguez’s representative PAGA claim, arguing that Rodriguez lacked standing to pursue a PAGA claim because his underlying Labor Code claims were decided against him. In May 2021, the trial court denied the motion. However, in August 2022, the company renewed its motion, citing to Viking River Cruises, Inc. v. Moriana, 596 US 639 (2022), a then-new case from the US Supreme Court relating to PAGA. In September 2022, the trial court granted the motion and entered a judgment of dismissal. Rodriguez appealed.

Appellate Court Affirms

On appeal, Rodriguez argued that the arbitrator’s decision against him on his individual Labor Code claims did not prevent him from representing others in court under PAGA. The Court of Appeal rejected that argument. The court held that “Rodriguez’s PAGA standing as an aggrieved employee was predicated on the Labor Code violations he failed to prove in arbitration. The trial court thus properly found the arbitration award and resulting judgment preclude Rodriguez from relitigating the Labor Code violations to prove standing to maintain the PAGA cause of action.”

Implications for Employers

This case illustrates the specific requirements for standing under PAGA, emphasizing that an employee must first prove a personal Labor Code violation before representing others in court under PAGA. Critically, this case also underscores the importance of arbitration agreements and their potential to limit unnecessary PAGA litigation.