In a notable decision by the California Court of Appeal, Angel Mondragon v. Sunrun Inc. (2024) sheds light on the enforceability of arbitration agreements, especially concerning claims under the Private Attorney General Act (PAGA). The ruling not only underscores the importance of clear contractual language but also highlights the protective measures for employee rights in arbitration scenarios regarding PAGA claims.

Angel Mondragon was employed by Sunrun Inc., which required him to sign an arbitration agreement as a condition of his employment. This agreement mandated arbitration for most employment-related disputes but specifically excluded claims filed under PAGA. After his employment ended, Mondragon filed a PAGA claim against Sunrun, citing various Labor Code violations affecting both him and other employees.

Sunrun responded by filing a motion to compel arbitration of Mondragon's individual claims under PAGA, arguing that the arbitration agreement's exclusion applied only to representative PAGA claims involving other employees, not to individual claims. The trial court denied this motion, leading Sunrun to appeal the decision.

On appeal, the Court first noted that Sunrun's arbitration agreement referenced the American Arbitration Association (AAA) rules, but this reference did not clearly and unmistakably delegate the authority to decide arbitrability to the arbitrator. Therefore, the Court determined that it had the responsibility to determine whether the claims were subject to arbitration. 

The Court then interpreted the language of Sunrun's arbitration agreement, concluding that it excluded all PAGA claims from arbitration, regardless of whether they were individual or non-individual claims. According to the Court, California law treats all PAGA actions as inherently representative, acting on behalf of the state. 

The Court acknowledged the U.S. Supreme Court's decision in Viking River Cruises, Inc. v. Moriana, which clarified the enforceability of arbitration agreements under the Federal Arbitration Act (FAA). However, the Court emphasized that Viking River did not impact the outcome of this case due to the specific exclusions in the arbitration agreement signed by Mondragon. As such, the Court of Appeal concluded that all PAGA claims were excluded from arbitration by the specific terms of the agreement, regardless of whether they were individual or non-individual claims.

This case highlights the critical importance of precise language in arbitration agreements and reinforces the protective nature of PAGA, allowing employees to bring claims on behalf of the state against employers for Labor Code violations. This protection remains robust, even against the backdrop of broader arbitration agreements. Moving forward, employers should explicitly state which claims are subject to arbitration and which are excluded to avoid ambiguity and potential litigation.  For employers and employees alike, understanding the scope and limits of such agreements is essential to navigate the complexities of employment disputes and arbitration effectively.