Court of Appeal clarifies PAGA arbitrability delegation requirements: Mondragon v. Sunrun Inc.

In Mondragon v. Sunrun Inc.,           Cal.App.5th           (Apr. 24, 2024), the Court of Appeal (Second Appellate District, Division Seven) held that courts may decide arbitrability issues unless the arbitration agreement “clearly and unmistakably” delegates that authority to the arbitrator.

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Plaintiff signed an arbitration agreement with a carve-out for PAGA claims. After termination, he filed a PAGA claim alleging Labor Code violations. Defendant moved to compel arbitration, arguing that the AAA Rules, incorporated by reference, delegated arbitrability to the arbitrator. The trial court denied the motion.

On appeal, the Court of Appeal affirmed. Citing Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, the court held that incorporating AAA rules by reference does not meet the “clear and unmistakable” delegation standard for unsophisticated employees. The court also found the agreement “clearly and explicitly excluded all PAGA claims.” While Viking River requires enforcement of agreements to arbitrate individual PAGA claims, that rule did not apply here because the agreement excluded all PAGA claims.

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