Court of Appeal clarifies that severance clauses and contractual ambiguity can bar PAGA bifurcation: LaCour v. Marshalls of California

In LaCour v. Marshalls of California (2025) 117 Cal.App.5th 455, the Court of Appeal (First Appellate District, Division Four) clarified that a PAGA waiver’s severance clause can prevent the bifurcation of “individual” PAGA claims into arbitration if the contract language is ambiguous.

Plaintiff filed a single PAGA cause of action for various Labor Code violations, seeking penalties on behalf of himself and other aggrieved employees without distinguishing between the two in his complaint. Defendant moved to compel arbitration of Plaintiff’s “individual PAGA claim” based on the framework established in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639. The trial court denied the motion, ruling that the complaint did not contain a separate individual PAGA claim that could be compelled to arbitration. Defendant appealed.

The Court of Appeal affirmed the denial of the motion to compel arbitration. After an extensive analysis of Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, Viking River and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, the court focused on the threshold question of whether the parties actually agreed to arbitrate individual PAGA claims. Notably, it declined to address the reasoning in Leeper v. Shipt, Inc. (2024) 107 Cal.App.5th 1001, which suggested that all PAGA claims necessarily include a bifurcable individual component. Instead, the court focused on pure contract interpretation and the contract’s severance clause. Plaintiff argued, and the court agreed, that because the agreement’s PAGA waiver was invalid under Iskanian, the specific language of the severance clause required the entire waiver to be excised and the PAGA action to be brought in court. The court rejected Defendant’s argument that the term “individual action” in the clause salvaged the individual PAGA portion for arbitration. Notably, the court reasoned that because the contract was drafted in 2014, the parties lacked the “clairvoyance” to mutually intend to arbitrate individual PAGA claims, a specialized legal framework that Viking River would not invent until eight years later. This ruling clarifies that for older agreements with broad PAGA waivers, the specific drafting of a severance clause may result in the entire PAGA dispute remaining in court rather than being split between two forums.

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