A recent unpublished California Court of Appeal decision, Hegemier v. A Better Life Recovery LLC, Cal. Ct. App., 4th Dist., No. G061892, demonstrates the potential consequence of drafting an arbitration agreement without foreseeing every way a future plaintiff might attempt to pick it apart. 

Almost two years ago, in Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022),the United States Supreme Court held that the Federal Arbitration Act preempts the rule from Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014) that Private Attorneys General Act (PAGA) actions could not be divided into individual and representative claims brought on behalf of other allegedly “aggrieved employees.”  This decision paved the way for employers to enforce agreements requiring individual arbitration even in the context of a PAGA action, by compelling the “individual” component of the PAGA claim to arbitration.  (Under California Supreme Court precedent, the “non-individual” component remains in court, where it is generally stayed until arbitration concludes.)

In attempting to follow this now-familiar playbook, the employer in Hegemier hit a snag.  The arbitration agreement contained a provision exempting from arbitration “claims that are not subject to arbitration under current law.”  The trial court interpreted this to mean that PAGA claims categorically were excluded from the agreement, because at the time the agreement was signed, Viking River had not yet been decided, and Iskanian would have precluded arbitration of the PAGA claims.

The Court of Appeal agreed.  Without further clarifying language such as “under current law, as it may be interpreted in the future,” the court interpreted the reference to “current law” to mean “a fixed ‘snapshot’ of claims that were deemed not arbitrable at the time the agreement was signed.”  Slip op. at 11.  Therefore, “among the types of claims the alleged agreement exempts from binding arbitration is that which Iskanian declared an employee could not be compelled to arbitrate based on a predispute agreement — both the individual and non-individual components of a PAGA claim.”  Id. at 2.

The Hegemier court acknowledged other Court of Appeal decisions reversed orders denying arbitration of individual PAGA claims based on pre-Viking River arbitration agreements (for example, as we reported here).  However, it distinguished those cases based on the “unambiguous language” limiting the scope of the agreement to arbitrable claims under “current law.”  Id. at 12.

Hegemier’s interpretation of “current law” is certainly open to criticism.  Ordinarily, we consider the task of a court interpreting statutory law as explaining what the law meant all along, rather than creating new law.  Indeed, the Viking River decision concludes that Iskanian’s prohibition against arbitration of the individual component of a PAGA claim was wrong the day it was decided.  Viking River, 596 U.S. at 662 (holding this rule “is incompatible with the [Federal Arbitration Act]”).

Ironically, while the exclusion of claims not arbitrable under “current law” in Hegemier was meant to ensure the arbitration agreement was enforced to the fullest extent, it was turned against the employer and ultimately excluded claims from arbitration that otherwise would have been arbitrable.  As we have reported (here and here), Hegemier was hardly the first case to do so.  Rather, it is the latest sober reminder that reminder that class and representative action plaintiffs will often seize on any plausible argument to avoid an arbitration agreement, and will sometimes find a receptive audience.   

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Photo of Jonathan Slowik Jonathan Slowik

Jonathan Slowik represents employers in all aspects of litigation, with a particular emphasis in wage and hour class, collective, and representative actions, including those under the Private Attorneys General Act (PAGA). He has defended dozens of class, collective, and representative actions in state…

Jonathan Slowik represents employers in all aspects of litigation, with a particular emphasis in wage and hour class, collective, and representative actions, including those under the Private Attorneys General Act (PAGA). He has defended dozens of class, collective, and representative actions in state and federal trial and appellate courts throughout California and beyond. In addition to his core wage and hour work, Jonathan has defended employers in single-plaintiff discrimination, harassment, and retaliation cases, and in labor arbitrations. Jonathan also regularly advises clients on a wide range of compliance issues and on employment issues arising in corporate transactions.

Jonathan has deep experience representing clients in the retail and hospitality industries, but has assisted all types of clients, including those in the health care, telecommunications, finance, media, entertainment, professional services, manufacturing, sports, nonprofit, and information technology industries.

Jonathan is a frequent contributor to Proskauer’s California Employment Law Blog and has written extensively about PAGA on various platforms. He has been published or quoted in Law360, the Daily Journal, the California Lawyer, the Northern California Record, and the UCLA Law Review.

Jonathan received his B.A. from the University of Southern California in 2007, magna cum laude, and J.D. from UCLA School of Law in 2012, where he was a managing editor of the UCLA Law Review.

Photo of Michelle Lappen Michelle Lappen

Michelle Lappen is an associate in the Labor & Employment Department and a member of the Employment Litigation & Arbitration Group. Her practice addresses a wide range of labor and employment issues, including matters involving alleged discrimination, harassment, retaliation, wage-and-hour issues, whistleblowing and…

Michelle Lappen is an associate in the Labor & Employment Department and a member of the Employment Litigation & Arbitration Group. Her practice addresses a wide range of labor and employment issues, including matters involving alleged discrimination, harassment, retaliation, wage-and-hour issues, whistleblowing and wrongful termination. Michelle has represented clients in a variety of industries, including entertainment, healthcare, financial services, professional services and technology.

Michelle has defended nationwide employers in connection with complex, overlapping wage-and-hour class and representative actions. Michelle also has defended single-plaintiff discrimination, harassment, retaliation and wage-and-hour cases in both arbitration and state and federal courts. Michelle has comprehensive experience in litigation, including propounding and responding to written discovery, defending depositions, drafting dispositive motions and managing preparation for trial. In addition to Michelle’s employment litigation practice, she advises clients on various employment issues, including litigation avoidance, pay data reporting and compliance with federal, state and local laws.

Michelle earned her J.D. from Columbia Law School, where she was an articles and submissions editor for the Columbia Journal of Law & the Arts. She also served as a teaching fellow for the Advanced Negotiation Workshop and advocated for state and federal legislation as a clinical student in the Columbia Law Health Justice Advocacy Clinic.

Michelle was selected to be a Protégée for Proskauer’s Women’s Sponsorship Program, an initiative for high-performing, midlevel associates that champions future leaders. She also serves as a member of the Firm’s Summer Program Committee.