A California employer requires its employees to sign arbitration agreements covering employment disputes. After leaving the company, a former employee files a lawsuit under the Private Attorneys General Act (PAGA), seeking civil penalties for Labor Code violations allegedly suffered by other employees.
The employer moves to compel arbitration. The employee responds that he deliberately excluded any claim for violations he personally suffered, leaving only representative claims on behalf of other employees.
Can an employee avoid arbitration by drafting the complaint this way?
In Castillo v. Belkorp AG, LLP (Oct. 23, 2026, F090527), the California Court of Appeal, Fifth Appellate District, held that an aggrieved employee may pursue a PAGA action consisting exclusively of nonindividual claims. Because the plaintiff had expressly excluded his individual PAGA claims, the court affirmed the denial of the employer’s motion to compel arbitration.
The ruling adds to an existing disagreement among California appellate courts. The California Supreme Court is scheduled to hear oral argument on the same underlying question in Leeper v. Shipt, Inc. on November 3, 2026.
The Employment Dispute
Steven Castillo worked as a service technician for Belkorp from May 2021 until January 2024.
During onboarding, Castillo signed an arbitration agreement requiring employment disputes to be resolved through individual arbitration. The agreement also contained a class-action waiver.
After his employment ended, Castillo submitted a notice to California’s Labor and Workforce Development Agency (LWDA), alleging various Labor Code violations.
The LWDA did not respond within the applicable 65-day waiting period. Castillo subsequently filed a PAGA complaint in February 2025.
The complaint was drafted to exclude any individual PAGA claim. Castillo sought civil penalties for violations allegedly suffered by other current and former employees, acting as a representative of the State of California.
Belkorp moved to compel arbitration.
The employer argued that Castillo could not avoid his arbitration agreement simply by omitting individual claims from the complaint. According to Belkorp, PAGA requires an action to include claims arising from violations personally suffered by the plaintiff, even if the complaint purports to seek penalties only for other employees.
The trial court denied the motion, and Belkorp appealed.
The Dispute Over PAGA’s Statutory Language
The appeal centered on Labor Code section 2699, subdivision (a), which authorizes an aggrieved employee to pursue civil penalties under PAGA.
The statute refers to violations committed against the employee and other current or former employees.
Belkorp argued that the Legislature’s use of the word "and" required every PAGA action to contain both an individual component and a nonindividual component.
Under that interpretation, an employee cannot eliminate the individual component simply by declining to plead it.
The argument had support in existing appellate authority.
In Leeper v. Shipt, Inc. (2024) 107 Cal.App.5th 1001, the Second District concluded that every PAGA action necessarily includes an individual claim. Consequently, a plaintiff subject to an enforceable arbitration agreement could be compelled to arbitrate that component even when the complaint expressly excluded individual relief.
Williams v. Alacrity Solutions Group, LLC (2025) 110 Cal.App.5th 932 adopted a similar interpretation.
Other appellate courts disagreed.
In CRST Expedited, Inc. v. Superior Court (2025) 112 Cal.App.5th 872 and Galarsa v. Dolgen California, LLC (2025) 115 Cal.App.5th 1, the courts concluded that PAGA permits an aggrieved employee to pursue only nonindividual claims.
The disagreement turns on the statutory language, legislative history, and PAGA’s purpose of authorizing employees to enforce California labor laws on the state’s behalf.
Why the Fifth District Allowed Castillo’s Representative-Only Action
The Fifth District agreed with the reasoning in CRST and Galarsa.
The court examined the statutory language and the legislative history concerning the use of "and" in section 2699(a).
Although "and" ordinarily has a conjunctive meaning, the court concluded that the Legislature had not clearly required every PAGA plaintiff to pursue penalties for both personal violations and violations affecting other employees.
The court also considered the practical consequences of requiring individual claims in every PAGA action.
Under Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, an enforceable arbitration agreement may require arbitration of an employee’s individual PAGA claims.
The California Supreme Court subsequently held in Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 that compelling individual PAGA claims to arbitration does not automatically eliminate the employee’s standing to pursue nonindividual claims in court.
If every PAGA complaint must contain an individual claim, employees with arbitration agreements may be required to arbitrate those claims before their representative claims proceed in court.
The Fifth District concluded that allowing an employee to pursue only nonindividual claims better served PAGA’s enforcement objectives.
It therefore interpreted section 2699(a) to permit an aggrieved employee to elect which component of a PAGA action to pursue.
Because Castillo expressly disclaimed individual PAGA claims, the court found no individual claim to compel to arbitration.
The order denying Belkorp’s motion was affirmed.
Did California’s 2024 PAGA Amendments Change the Result?
Belkorp also relied on the Legislature’s substantial amendments to PAGA in 2024.
Those amendments changed several aspects of PAGA litigation, including standing requirements, available penalties, and procedures for addressing alleged Labor Code violations.
For actions governed by the amended standing provisions, an employee generally must have personally suffered each alleged Labor Code violation during the applicable limitations period, subject to statutory exceptions.
Belkorp argued that the amendments reinforced the requirement that a PAGA action include individual claims.
The Fifth District disagreed.
The court distinguished the requirements for establishing standing from the claims an employee chooses to assert.
An employee may be required to demonstrate that he personally suffered the alleged violations to qualify as an aggrieved employee. That does not necessarily mean he must seek civil penalties for those personal violations in the complaint.
The court found nothing in the 2024 amendments that required a different interpretation.
This distinction is significant for employers defending PAGA lawsuits filed after the statutory reforms.
A plaintiff’s decision to exclude individual claims does not eliminate the need to establish statutory standing. However, under Castillo, the plaintiff may satisfy the standing requirements while pursuing penalties exclusively for violations affecting other employees.
What Castillo Means for California Employers
Many California employers use arbitration agreements to resolve employment disputes outside court.
Those agreements remain important, but Castillo illustrates a limitation when an employee files a representative PAGA action.
An employer may have an enforceable agreement covering the employee’s individual employment claims. If the complaint expressly seeks only nonindividual PAGA penalties, however, the employer may be unable to compel arbitration merely by arguing that an individual PAGA claim must exist.
The precise allegations in the complaint therefore matter.
Before moving to compel arbitration, an employer should examine whether the employee has actually asserted individual PAGA claims, whether the arbitration agreement covers those claims, and whether the plaintiff satisfies PAGA’s standing requirements.
The employer must also consider the developing appellate authority.
An unsuccessful motion to compel arbitration can consume substantial time and expense, particularly when the parties must litigate whether the complaint contains an arbitrable individual component.
For employers facing representative wage-and-hour claims, the litigation strategy should account for the language of the arbitration agreement, the statutory period involved, and the specific Labor Code violations alleged.
The California Supreme Court Will Address the Conflict
The appellate disagreement remains unresolved.
The California Supreme Court granted review in Leeper v. Shipt, Inc., Case No. S289305, to consider whether every PAGA action necessarily includes an individual component or whether an employee may pursue only representative claims.
Oral argument is scheduled for November 3, 2026.
The Supreme Court’s eventual decision may resolve the disagreement between Leeper and Williams, on one side, and CRST, Galarsa, and Castillo, on the other.
Several of the earlier appellate decisions are already under Supreme Court review, which affects their precedential status under California Rules of Court, rule 8.1115(e).
As of this article’s publication date, Castillo is a published Court of Appeal decision. Its interpretation should be evaluated in light of the pending Supreme Court proceedings and any subsequent orders affecting its status.
Employers should therefore avoid assuming that the current disagreement has been conclusively resolved.
A Developing Issue in Employment Arbitration
The Fifth District affirmed the denial of Belkorp’s motion to compel arbitration. It did not decide whether the alleged Labor Code violations occurred or whether Castillo would ultimately recover PAGA penalties.
The decision addresses the structure of a PAGA action and whether an employer can compel arbitration of an individual component that the plaintiff expressly declined to assert.
For California businesses, the immediate concern is how representative PAGA claims interact with existing arbitration agreements.
The Supreme Court’s forthcoming consideration of Leeper makes this an area of law that warrants close attention, particularly for employers defending newly filed PAGA actions or evaluating motions to compel arbitration.
Elpis Law represents California businesses and individuals in commercial litigation, employment disputes, and arbitration-related proceedings. Employers facing PAGA claims should evaluate the applicable statutory requirements, the arbitration agreement, and the allegations of the particular complaint before determining how to respond.
Legal Authorities
- Castillo v. Belkorp AG, LLP (Oct. 23, 2026, F090527), Cal. Ct. App., 5th Dist., certified for publication — opinion
- Leeper v. Shipt, Inc. (2024) 107 Cal.App.5th 1001, review granted on the court’s own motion Apr. 16, 2025, S289305; oral argument Nov. 3, 2026 — Supreme Court calendar
- Williams v. Alacrity Solutions Group, LLC (2025) 110 Cal.App.5th 932
- CRST Expedited, Inc. v. Superior Court (2025) 112 Cal.App.5th 872, review granted
- Galarsa v. Dolgen California, LLC (2025) 115 Cal.App.5th 1, review granted
- Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639
- Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104
- California Labor Code § 2699 — official text
- Code of Civil Procedure § 1281.2 — official text
Related practice areas: Executive and Employment-Related Disputes · Business and Commercial Litigation