By: Matt C. Sgnilek, Partner; Kate Den Bleyker, Partner; Ali Abouesh, Associate; and Maysa Saeed, Associate

The Private Attorneys General Act of 2004 (“PAGA”) is a cornerstone of California’s wage and hour enforcement landscape. PAGA allows employees to step into the shoes of state regulators and pursue civil penalties for Labor Code violations. California courts have recently begun issuing a string of judicial decisions that have created uncertainty over the viability of so-called “headless PAGA” claims. A “headless PAGA” claim is one where an employee seeks civil penalties solely on behalf of others without pursuing their own individual claims. This is done as a strategic end-run around arbitration agreements and caselaw that requires the employees to first arbitrate their individual PAGA claims before being able to proceed on a groupwide basis in court. For employers, understanding both the new tools and new challenges posed by these decisions is critical in managing their business’s litigation risk.

PAGA’s Core Requirement: Employees Must Have Standing to Sue

To start, PAGA only allows an “aggrieved employee” to bring a claim. To be an “aggrieved employee,” the employee must have personally experienced at least one Labor Code violation. Personal experience of a violation determines whether an employee has the ability to bring a valid PAGA action, either individually or as a representative for others. This foundational principle has become a fault line in recent court decisions, particularly when employees file “headless PAGA” claims—bringing representative PAGA claims without also explicitly pleading an individual PAGA claim. The plaintiffs’ bar does this as a strategic tool to try and avoid employer arbitration agreements, and caselaw which requires representative PAGA claims subject to an arbitration agreement to be stayed while the plaintiff arbitrates their individual PAGA claim first, to determine whether or not that plaintiff is an “aggrieved employee” who has standing to then pursue the representative component of their case.

Breakdown of Recent Key Court Decisions

• Leeper v. Shipt: Headless PAGA Claims Cannot Avoid Arbitration

The Leeper v. Shipt, Inc. decision set the stage for the current debate around headless PAGA claims. In Leeper the employee attempted to bring a representative PAGA action without an individual claim. The court rejected this tactic. It ruled that every PAGA claim regardless of whether it is framed as individual, or representative must be rooted in an individual claim. Their interpretation relied on PAGA’s statutory language, which requires claims be filed “on behalf of the employee and other current or former employees.” As a result, the court concluded that even if an employee does not explicitly pursue an individual claim, courts must assume an individual component exists. Significantly for employers, the Leeper court reasoned that having an individual claim in the case allowed the employer to compel arbitration of that claim if an arbitration agreement was in place. Finally, the court added that any remaining representative claim must be stayed pending arbitration. The Leeper court held that a “headless” PAGA claim—a representative claim without an individual claim—would not stand in California.

• Rodriguez v. Lawrence Equipment: Arbitration’s Utility as a Strategic Tool

In Rodriguez v. Lawrence Equipment, Inc., the court addressed a situation where an employee lost on the merits in arbitration on their individual claims. According to the Rodriguez court, the arbitration result prevented the employee from continuing with their representative PAGA claim in court. The court reasoned that an employee that lost on their individual claim could no longer prove they were “aggrieved” under PAGA and thus had no standing to pursue a representative claim. Fundamentally, this decision gives employers a powerful tool: by winning in arbitration, an employer may be able to block a representative PAGA lawsuit altogether.

• Rodriguez v. Packers Sanitation: Narrow Path for Headless PAGA

In Rodriguez v. Packers Sanitation Services Ltd., LLC, the court took a more nuanced approach. The employee in this case specifically stated they were not pursuing individual claims and only sought civil penalties on behalf of other employees. The court allowed this, so long as the employee bringing the claim met the requirement for standing under PAGA, meaning they had personally suffered at least one of the alleged violations. The court emphasized that arbitration of an individual claim does not automatically strip an employee of standing to bring a representative claim. In effect, this decision allows for the possibility of headless PAGA claims if an employee properly establishes standing as an aggrieved employee.

• Williams v. Alacrity Solutions: Individual Claim Required for Timeliness and Validity

In Williams, the court reaffirmed that an individual claim is central to any PAGA action. Without an individual claim, courts cannot determine whether the action is either timely or valid under the statute. The decision aligned with Leeper in rejecting the headless PAGA model, reinforcing the need for employees to assert personal claims to move forward.

How Employers Can Navigate the Uncertain PAGA Landscape

Together, these recent appellate decisions have created a complex and unsettled legal landscape for PAGA claims in California. Leeper and Williams strongly reinforce the requirement of an individual claim for standing. Yet, Rodriguez v. Packers Sanitation Services Ltd., LLC introduced limited flexibility—allowing an employee to pursue representative claims without asserting an individual claim, so long as they personally experienced at least one Labor Code violation. Meanwhile, Rodriguez v. Lawrence Equipment, Inc. demonstrates that a loss in arbitration on the individual claim can negate further representative litigation. Importantly, Leeper is currently under review by the California Supreme Court, and its eventual decision may bring needed clarity to the viability of so-called “headless PAGA” claims. Until it is revolved, Leeper remains binding precedent, and employers should proceed accordingly.

To mitigate risk, employers should:

• • Enforce arbitration agreements early to compel individual claims to arbitration.
  • Consider Motions to Bifurcate individual claims from representative claims for those employers without an arbitration agreement.
  • Leverage arbitration outcomes to preclude remaining representative claims.
  • Carefully evaluate PAGA complaints for a properly alleged individual claim and move to dismiss or strike if missing; and
  • Seek to stay representative actions once arbitration is ordered under California Code of Civil Procedure section 1281.4.

Taking strategic and early action is critical for employers to defend against PAGA exposure as this continues to develop. The attorneys of O’Hagan Meyer’s Wage & Hour team are ready to partner with employers to navigate this shifting PAGA landscape.