Reported / Citable
Background
Steven Castillo worked as a service technician for Belkorp AG, LLC from May 2021 until his termination in January 2024. During onboarding in December 2020, Castillo signed an arbitration agreement requiring all employment disputes to be resolved through binding arbitration on an individual basis, including a class and collective action waiver. The agreement provided that if the class action waiver was unenforceable, any class action would proceed in court. In November 2024, Castillo provided notice to the Labor and Workforce Development Agency (LWDA) of Labor Code violations by Belkorp. After the LWDA did not respond within the 65-day statutory period, Castillo filed a PAGA complaint in February 2025 asserting exclusively nonindividual claims on behalf of other current and former aggrieved employees and as a proxy for the State of California. The complaint expressly stated Castillo sought only to prosecute non-individual PAGA claims and did not seek to prosecute any individual PAGA claims.
Belkorp filed a motion to compel arbitration in July 2025. At the September 2025 hearing, the trial court denied the motion, noting a split of authority between Leeper v. Shipt, Inc. (which required both individual and nonindividual claims) and CRST Expedited, Inc. v. Superior Court (which permitted headless PAGA actions). The court found Belkorp's failure to address CRST in its briefing to be a concession on the merits. Belkorp appealed, arguing the trial court erred by (1) failing to adjudicate the merits of its motion, (2) concluding Castillo could maintain a PAGA action with only nonindividual claims, and (3) failing to order arbitration.
The Court’s Holding
The Court of Appeal affirmed the denial of the motion to compel arbitration. The court held that an aggrieved employee may bring a PAGA action consisting only of nonindividual PAGA claims under the post-July 1, 2024 version of PAGA. Following CRST and Galarsa, the court interpreted the word "and" in Labor Code section 2699(a) — authorizing an action "on behalf of himself or herself and other current or former employees" — as an ambiguous term that may be construed as an inclusive disjunctive (meaning "or") in exceptional circumstances. The court found such exceptional circumstances exist because PAGA is a unique remedial statute deputizing employees as enforcement agents for the LWDA, and Viking River Cruises, Inc. v. Moriana dramatically altered the legal landscape by permitting arbitration agreements to bifurcate PAGA actions, creating delays and increased risk of adverse outcomes that undermine PAGA's enforcement purpose.
The court rejected Belkorp's arguments. First, it found Leeper's legislative history analysis inconclusive and its statutory analysis deficient for ignoring the Supreme Court's directive to liberally construe labor laws and the disjunctive interpretation of "and" recognized in People v. Reynoza. Second, the court held that standing under section 2699(c)(1) requires only that the plaintiff personally suffered each alleged violation within the one-year limitations period, not that the plaintiff also seek to recover penalties for those violations as individual claims. Third, the court concluded that Viking River and Adolph do not foreclose headless PAGA actions because those cases involved PAGA actions with both individual and nonindividual claims and did not consider the possibility of nonindividual-only actions. Fourth, the 2024 PAGA amendments — which narrowed standing to require personal experience of each violation but did not address the "and" in section 2699(a) or mandate pursuit of both claim types — do not undermine CRST. Because Castillo's complaint asserts only nonindividual claims, which are not subject to arbitration under Viking River and Adolph, the arbitration agreement and class action waiver cannot be enforced against him.
Key Takeaways
- An aggrieved employee may file a "headless" PAGA action asserting only nonindividual claims on behalf of other employees and the LWDA without also asserting individual claims for penalties based on personally experienced violations.
- The word "and" in Labor Code section 2699(a) is ambiguous and may be interpreted as an inclusive disjunctive ("or") to permit nonindividual-only PAGA actions, given PAGA's unique remedial purpose and the disruptive effect of Viking River's bifurcation mandate.
- PAGA standing under section 2699(c)(1) is satisfied by personally experiencing each alleged violation within the one-year limitations period; the plaintiff need not seek recovery for those violations as individual claims.
- Nonindividual PAGA claims are not subject to arbitration under the Federal Arbitration Act, even when a valid arbitration agreement with a class action waiver exists, because Viking River and Adolph only require arbitration of individual PAGA claims.
- The 2024 PAGA amendments, which tightened standing requirements but did not expressly prohibit headless actions or alter the "and" in section 2699(a), do not abrogate the authority of CRST, Galarsa, and Balderas permitting nonindividual-only PAGA actions.
Why It Matters
This decision deepens a split among California Courts of Appeal on whether PAGA plaintiffs must assert both individual and nonindividual claims. By firmly adopting the CRST/Galarsa/Balderas line of authority, the Fifth District ensures that aggrieved employees in its jurisdiction can avoid the delays and procedural hurdles of bifurcated arbitration proceedings by electing to pursue only nonindividual claims. This preserves the efficiency and deterrent effect of PAGA enforcement actions, particularly where arbitration agreements would otherwise compel individual claims into a separate forum. The ruling also clarifies that the 2024 PAGA amendments — while narrowing standing — did not eliminate the availability of headless actions, and that the Legislature's failure to expressly overrule Balderas (decided before the amendments) supports the inference that such actions remain permissible. The decision will likely be cited in ongoing and future PAGA litigation as courts and parties await California Supreme Court review of the split in Leeper, Williams, CRST, and Galarsa.