In April 1999, Julian Rodriguez began working as an hourly machine operator for Lawrence Equipment Inc. a manufacturer of flat bread machinery, and later became a computer numerical control operator. In July 2014, Rodriguez executed an arbitration agreement with Lawrence. The agreement required Rodriguez and Lawrence to submit any dispute related to Rodriguez’s employment to binding arbitration. Lawrence terminated Rodriguez’s employment in October 2015. 1

In December 2015, Rodriguez filed a class action against Lawrence, alleging six different wage-and-hour violations, a seventh cause of action for Unfair Business Practices. He also sought civil penalties and wages in the eighth cause of action pursuant to the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)1 (PAGA).

The trial court ordered arbitration of Rodriguez’s wage and hour claims, and stayed Rodriguez’s single PAGA cause of action pending the completion of arbitration.

In February 2018, the arbitrator issued an award in favor of Lawrence and against Rodriguez. While acknowledging that Rodriguez’s complaint “alleged that he had not been provided with proper meal and rest periods . . . that he had not been provided with accurate wage statements . . . [and] had not been paid all earned and final wages,” the arbitrator stated Rodriguez only presented evidence related to Lawrence’s alleged nonpayment of hours worked and noncompliant meal and rest breaks. The arbitrator found that Rodriguez had “failed to sustain his burden of proof as to whether he was actually required . . . to be at his work site five minutes” early, and “[e]ven if he had sustained his burden on this issue,” his timesheets failed to show he was actually there before the work shift started. The arbitrator also found that Rodriguez “received a total of thirty minutes of rest breaks each day and a thirty minute meal break,” and thus failed to sustain his burden that he was entitled to additional pay for any alleged failure to provide proper meal and rest breaks. The arbitration award stated that Rodriguez shall take nothing by way of his complaint.

After the trial court entered judgment on the arbitration award, Lawrence brought a motion for judgment on the pleadings asserting that the remaining PAGA cause of action was barred by issue preclusion since Rodriguez’s standing as an aggrieved employee was predicated on the disproven wage and hour violations. The trial court granted the motion and dismissed Rodriguez’s case.

Rodriguez appealed, contending for the elements of issue preclusion have not been satisfied. The Court of Appeal affirmed in the published case of Rodriguez v. Lawrence Equipment, Inc. -B325261 (Nov 2024).

Courts “have frequently used ‘res judicata’ as an umbrella term encompassing both claim preclusion and issue preclusion, which [have been] described as two separate ‘aspects’ of an overarching doctrine. [Citations.] Claim preclusion . . . acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. [Citation.] Issue preclusion, . . . historically called collateral estoppel, describes the bar on relitigating issues that were argued and decided in the first suit.”

At issue on appeal is whether an arbitrator’s previous adjudication of Labor Code violations in favor of Lawrence precludes Rodriguez from asserting a PAGA cause of action based on those same Labor Code violations.

In Rocha v. U-Haul Co. of California (2023) 88 Cal.App.5th 65, 77 (Rocha), Division One of the Second District Court of Appeal addressed this very issue. The Rocha court considered whether an arbitrator’s finding that the employer did not violate section 1102.5, rendered in the context of the employees’ personal claims for damages, precluded those employees from alleging in a subsequent complaint that they had standing under PAGA to seek civil penalties based on the same purported violation. (Rocha, at pp. 76-78.) Applying general principles of issue preclusion, the appellate court held the employees could not rely on the employer’s alleged section 1102.5 violation to establish PAGA standing. (Rocha, at p. 79.)

The Rocha court expressly disagreed with Gavriiloglou v. Prime Healthcare Management, Inc. (2022) 83 Cal.App.5th 595 (Gavriiloglou), which Rodriguez cites in support of reversal. In Gavriiloglou, Division Two of the Fourth District concluded the arbitrator’s finding that plaintiff had not suffered a Labor Code violation did not preclude that same plaintiff from qualifying as an “aggrieved employee” under the PAGA based on the same alleged Labor Code violations. (Id. at pp. 601-603.) Citing the Restatement Second of Judgments, Code of Civil Procedure section 1908, and several California cases about claim preclusion (not issue preclusion).

“We find persuasive Rocha’s analysis of issue preclusion and thus decline to follow Gavriiloglou.”

“We therefore conclude all of Rodriguez’s wage and hour violations, including those related to sections 226, subdivision (a), and 201, were actually litigated and necessarily decided in the arbitration proceedings.”

“We also note that Rodriguez presented no evidence at arbitration to support his sections 226, subdivision (a), and 201 contentions. The arbitration award observed: ‘The evidence presented at the arbitration hearing dealt solely with the issues of alleged non-payment for all hours worked and the allegation of legally non-compliant meal and rest breaks.’ In other words, Rodriguez chose not to present evidence on these claims at arbitration and now seeks to justify litigation of these claims based on that choice. This is precisely the type of gamesmanship that issue preclusion aims to prevent.”

2nd and 4th District Courts of Appeal Diverge on Arbitration/Preclusion Doctrine