News & Insights
Court of Appeal Decision a Cautionary Tale on the Importance of Carefully Drafting Exclusionary Language in Arbitration Agreements
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.
California Supreme Court Confirms Employees Are Not Entitled to Intervene in Overlapping PAGA Cases
By: Kerri N. Kramer and Francesca Gonzales The California Supreme Court recently held that an aggrieved employee bringing an action under the Private Attorneys General Act (PAGA) cannot intervene in another PAGA action with overlapping claims or object to a proposed settlement.
In Turrieta v. Lyft, Inc., a settlement was reached after an employee sought relief under PAGA for misclassification, failure to pay overtime, and failure to reimburse business expenses. Two nonparties, who had overlapping PAGA claims against Lyft in other cases, objected to the settlement. The trial court approved the settlement and determined that the nonparties were not entitled to object to the settlement, intervene in the case, or move to vacate the judgment. The nonparties appealed and the Court of Appeal affirmed the prior ruling.
The California Supreme Court granted review and affirmed the Court of Appeal’s judgment. The Court ultimately held that “an aggrieved employee’s status as the State’s proxy in a PAGA action does not give that employee the right to seek intervention in the PAGA action of another employee, to move to vacate a judgment entered in the other employee’s action, or to require a court to receive and consider objections to a proposed settlement of that action.”
The Court found that the nonparties’ intervention “is inconsistent with the scheme the Legislature enacted and for that reason, outside the scope of [their] authority to commence and prosecute a PAGA action on the state’s behalf.” The court found that the nonparties could not establish a cognizable interest to support their intervention under Code of Civil Procedure section 387.
As to the nonparties’ motion to vacate the judgment, the Court stated that there are no PAGA provisions that reference a power to make this motion in another aggrieved employee’s PAGA action asserting overlapping claims. The Court found that it would be inconsistent with the statutory scheme as a whole to find this as an implied power.
Lastly, the Court found that courts are not required by section 187 of the Code of Civil Procedure to receive and consider objections to a proposed settlement, such as the proposed settlement from the Turrieta action. Instead, the Court stated that the statute grants courts the discretion to “create its own reasonable procedure in the exercise of its jurisdiction where the law provides no specific procedure.”
Kerri N. Kramer is a Partner specializing exclusively in employment law. Her primary work involves helping keep employers out of PAGA and similar actions, but she also helps defend 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.