A PAGA suit pleading only nonindividual claims cannot be sent to arbitration, the Fifth District holds

Can an employee file a PAGA action that pleads only nonindividual claims and keep it out of arbitration? In Castillo v. Belkorp AG, LLP, the Fifth District said yes. It held that “an aggrieved employee may bring a PAGA action that consists only of nonindividual PAGA claims under the post-July 1, 2024 version of PAGA,” and that because those claims are not arbitrable, the employer’s arbitration agreement and class or collective action waiver could not be enforced against him.

What happened in Castillo

Castillo worked for Belkorp as a service technician from May 2021 until January 2024. He had completed onboarding documents that included an arbitration agreement requiring individual arbitration and waiving class and collective actions. After giving notice to the Labor and Workforce Development Agency, which did not respond, he filed a complaint in Stanislaus County Superior Court with a single cause of action under the Private Attorneys General Act (PAGA). The complaint expressly sought only nonindividual PAGA claims, on behalf of other employees and the state.

Belkorp moved to compel arbitration. The trial court denied the motion, and Belkorp appealed. The Court of Appeal reviewed the question de novo because it turned on statutory interpretation.

Can a PAGA action include only nonindividual claims?

The Courts of Appeal are divided. Leeper v. Shipt, Inc. and decisions following it read Labor Code section 2699, subdivision (a), to require a PAGA plaintiff to bring both individual and nonindividual claims. Other decisions, including CRST Expedited and Galarsa, allow an action limited to nonindividual claims. The Fifth District sided with CRST and declined to follow Leeper.

The dispute centers on the word “and” in section 2699(a). The court acknowledged that “and” is ordinarily conjunctive, but concluded the statute is ambiguous and that, given PAGA’s remedial purpose and the disruption caused by Viking River Cruises, Inc. v. Moriana, the word should be read to include “or.” The court also found Leeper’s reading of the legislative history unpersuasive.

The court then addressed standing. Under the July 2024 amendments, a PAGA plaintiff must have been employed by the alleged violator and personally suffered each alleged violation within the limitations period. Nothing in that test, the court held, requires the plaintiff to pursue individual penalties. Choosing to plead only nonindividual claims is not a judicial admission that the plaintiff suffered no violations. If an employer thinks a complaint fails to plead standing, the court explained, that is a pleading challenge for a demurrer, not a ground for a motion to compel arbitration.

Are nonindividual PAGA claims subject to arbitration?

No. Belkorp argued that Viking River and Adolph v. Uber Technologies, Inc. contemplate splitting a PAGA action and sending the individual part to arbitration. The court answered that those cases never considered whether a PAGA action could consist only of nonindividual claims, and that:

“Viking River and Adolph did not hold that nonindividual PAGA claims are subject to arbitration through FAA preemption.”

With no individual claim pleaded, there was nothing to arbitrate, and the court concluded: “Because nonindividual PAGA claims are not subject to arbitration, there can be no violation of the FAA or public policy if an aggrieved employee pursues only nonindividual PAGA claims.” The disposition reads: “The trial court’s denial of Belkorp’s motion to compel arbitration is affirmed. Castillo is awarded his costs on appeal.”

What this means in practice

For employers, Castillo means an individual arbitration agreement may not reach a PAGA complaint drafted around it, at least in courts that follow this line of authority. For employees, in those same courts, it confirms a pleading choice that keeps the whole action in court.

The question is not settled. The opinion notes that review has been granted in Leeper, CRST and Galarsa, so the California Supreme Court is expected to resolve the split. Until then, which side of the split a court follows can decide whether a PAGA case is litigated or arbitrated. On the timing side of arbitration disputes, see our note on arbitration waiver timing, and on a different limit on arbitration agreements, our note on Molina v. Triumph.

Why this case shows the value of appellate counsel

An order denying a motion to compel arbitration in a PAGA case now sits on top of a live split, with the Supreme Court reviewing the leading cases on both sides. For an employer, that makes the appeal a question of positioning: which authority the trial court was asked to follow, what record was made on standing, and whether the argument belongs in a motion to compel at all or in a demurrer, as Castillo held. For an employee, it means defending the ruling on the ground the court of appeal actually decides. Framing those choices, and preserving them for a Supreme Court decision that may change the law, is the work of appellate counsel.

Facing a ruling you may need to appeal or challenge by writ? Yisrael Gelb · yisrael@gelblawapc.com · (323) 632-6864

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