By: Kerri N. Kramer and Francesca Gonzales
April 24, 2025
In a newly-issued decision, the California Third District Court of Appeal reiterated the importance of drafting to arbitration agreement enforcement. In Ford v. The Silver F, Inc., the court held that the exclusionary clause an employer used to carve out “representative” claims under the Private Attorneys General Act (PAGA) from its arbitration agreement applied not just to non-individual PAGA claims, but even to the employee’s individual PAGA claims. Ford v. The Silver F, Inc., 2025 WL 1039379, at *6.
In Ford, the employee entered into an arbitration agreement with his employer, where he generally agreed to arbitrate any employment-related disputes. The agreement, however, excluded certain types of disputes, including claims for workers’ compensation or unemployment compensation, specified administrative complaints, ERISA claims, and, critically “representative” claims under PAGA.
In February 2022, the employee filed a PAGA-only lawsuit against his employer. The employer moved to compel arbitration of the employee’s “individual” PAGA claims and to dismiss the employee’s “representative” PAGA claims. The employee opposed the motion, arguing that the arbitration agreement excluded all PAGA claims (both individual and nonindividual) from the scope of arbitration. The trial court agreed and denied the motion.
When the employer appealed, it argued that the term “representative” was ambiguous, as discussed in Viking River (which held, in a groundbreaking 2022 ruling that PAGA claims are divisible into “individual” and “representative” components, with the individual claims being subject to arbitration). Specially, that Court (and many after) have discussed the confusion that arises because PAGA claims are “representative” in that they are brought on behalf of the State but also in that can concern alleged violations against other employees. The employer argued that, in interpreting the term as used in the agreement, that the Court of Appeal must apply the Federal Arbitration Act’s presumption of arbitrability and construe the agreement to permit arbitration of the employee’s individual PAGA claims.
The employee, in turn, argued that the trial court correctly resolved ambiguity about the meaning of the term “representative” in the exclusionary clause against the employer as the drafter of the agreement.
The Court of Appeal looked to the language of the contract, construing the words in the context of the instrument as a whole and the circumstances under which it was made. The Ford court that the parties intended the PAGA exclusion to be construed broadly, similar to the other types of claims excluded from the scope of arbitration. It also relied heavily on the law that existed – and the language being used to described those laws – at the time the agreement was entered into. At the time the parties entered into the arbitration agreement, California courts were consistently holding that every PAGA action was a “representative” action and that PAGA claims could not be split into “individual” and “representative” components through an agreement to arbitrate. The Ford court concluded that because the arbitration agreement was formed prior to Viking River, the only reasonable interpretation of “representative claims under [PAGA]” is that it was intended to exclude all PAGA claims.
In the end, the employer’s outdated arbitration agreement gave the employee the excuse he was looking for to avoid arbitrating his individual PAGA claim and allowed him to proceed in Court with his entire PAGA action.
This case should serve as a crucial reminder to employers about the importance of regularly updating arbitration agreements in accordance with ever-evolving case law. Employers are encouraged to reach out to an experienced employment attorney to review their policies surrounding their arbitration agreements, including exclusionary clauses relating to PAGA claims.
Kerri N. Kramer is a Partner specializing exclusively in employment law. Her primary focus is helping keep employers out of PAGA and similar actions, but she also defends them when such claims cannot be avoided. She can be reached at (949) 393-1400 or [email protected]. Francesca Gonzales is a law clerk at the Firm.