Poorly Worded Severance Clause Results in Denial of Employer’s Motion to Compel PAGA and All Other Claims to Arbitration

On December 12, 2018, the Third Appellate District in Smigelski v. PennyMac Financial Services affirmed a trial court’s denial of an employer’s motion to compel arbitration of its former employee’s Private Attorneys General Act claims. In its unpublished decision, the Smigelski court found that the parties’ arbitration agreement contained an unenforceable waiver of the plaintiff’s right to bring a representative action under the PAGA in court, and that the language used in the parties’ agreement did not permit the court to “sever” the unlawful PAGA waiver provision and enforce the remainder of the agreement to arbitrate. Accordingly, because the arbitration agreement was held unenforceable, the court would not compel arbitration of any of plaintiff’s causes of action, including those that would otherwise be arbitrable.