The employer’s arbitration clause covered everything - except the claim that was actually filed
A California appeals court has handed employers a problem they cannot arbitrate away.
The Fifth Appellate District on October 23 affirmed a trial court’s refusal to compel arbitration in a dispute between Belkorp AG and a former service technician who had brought a Private Attorneys General Act (PAGA) action - California’s law that lets workers sue on behalf of the state to recover penalties for Labor Code violations.
The twist: the worker filed only representative claims on behalf of other employees. No individual claims at all. With nothing individual to send to arbitration, the court held, the employer’s arbitration agreement simply did not apply.
The strategy is known in California employment law circles as a “headless” PAGA action - a term the court itself used. Here is why it matters.
Since the US Supreme Court’s 2022 decision in Viking River Cruises v. Moriana, employers have relied on arbitration agreements to split PAGA actions in two - sending the worker’s individual claims to arbitration while the broader representative claims sit in court, sometimes for years. The Fifth District’s own earlier decision in CRST Expedited v. Superior Court found that this forced split caused roughly two-year delays and worse outcomes for workers in arbitration.
The worker here skipped the split. His February 2025 complaint in Stanislaus County Superior Court stated he sought “only to prosecute his non-individual PAGA claims” and brought the action “exclusively as a proxy of the State of California.” Belkorp moved to compel arbitration in July 2025. The trial court denied it.
The trial court also flagged what it called a breach of the duty of candor - Belkorp had not disclosed that a key case it relied on, Leeper v. Shipt, had been under California Supreme Court review since April 2025.
On appeal, the Fifth District sided with CRST, which held that the word “and” in the PAGA statute connecting individual and representative claims is ambiguous and can be read as “or.” The court cited CRST’s illustration: if a parent gives a child permission to have cookies and ice cream, eating only the cookies does not break the rule. The greater includes the lesser.
Belkorp argued this reading clashed with Viking River and the California Supreme Court’s decision in Adolph v. Uber Technologies. The court was not persuaded, noting that neither case had actually considered a PAGA action with only nonindividual claims. The issue simply never came up.
Belkorp also pointed to the July 2024 PAGA amendments, which tightened standing requirements so that a worker must have personally experienced each alleged violation. The court drew a clear line: those amendments define who qualifies as an aggrieved employee, not what type of claims that employee must pursue.
The question is heading to the California Supreme Court, which has granted review in the conflicting cases. The Fifth District and the Fourth District now sit on one side of the split, alongside Division Six of the Second District. Divisions One and Five of the Second District are on the other.
For HR teams in California, the practical signal is clear: arbitration clauses that once looked like reliable PAGA shields may not stop a headless action from going straight to court. Employers with PAGA exposure should be stress-testing their arbitration agreements with this strategy in mind.
The decision is filed October 23, 2026). It is certified for publication.
