California Employers: Arbitration Agreements Just Got More Useful

Arbitration agreements have long been a useful tool for employers because they can move employment disputes out of court and into a more streamlined private forum. In Sorokunov v. NetApp, Inc., the California Court of Appeal held that after the employee lost his individual Labor Code claims in arbitration, he could not continue pursuing a representative PAGA action based on those same alleged violations. The decision is important because it shows that, in the right case, arbitration may do more than change the forum of the dispute — it may also help eliminate the plaintiff’s standing to continue the representative claim.

For employers and HR teams, the case reinforces the value of having a well-drafted, enforceable arbitration agreement while also maintaining strong wage-and-hour compliance practices.

If your company is reviewing arbitration agreements, responding to a PAGA claim, or assessing California wage-and-hour compliance risks, our attorneys can help. Contact us at contact@consultils.com for strategic, employer-focused legal guidance.

Case Background

Alexander Sorokunov sued his former employer, NetApp, Inc., seeking damages and civil penalties under PAGA. He alleged that NetApp improperly collected or received wages paid to him, secretly paid him less than promised under a contractual wage scale, and used a discretionary process to determine commissions owed. He did not assert class claims, but he did seek to proceed under PAGA. 

The trial court compelled arbitration of Sorokunov’s individual non-PAGA Labor Code claims. At the same time, the court refused to stay the PAGA claim while arbitration was pending. That meant the arbitration moved forward first on the question of whether Sorokunov himself had actually suffered the alleged Labor Code violations. 

In arbitration, Sorokunov lost. The arbitrator ruled against him on his individual Labor Code claims. NetApp then went back to court and sought judgment on the pleadings on the PAGA claim based on those same underlying Labor Code theories. The trial court agreed, and the Court of Appeal affirmed. 

That sequence is what makes the case important. Sorokunov was not just about sending claims to arbitration. It addressed the next question employers actually care about: if the employee loses in arbitration on the same underlying Labor Code issues, can that loss also end the representative PAGA case? 

In this case, the answer was yes.  

Key Legal Reasoning

1. PAGA requires an “aggrieved employee.”

Under PAGA, a plaintiff must be an “aggrieved employee,” meaning the plaintiff must have personally suffered at least one of the Labor Code violations at issue. If the named employee cannot establish that threshold status, the employee cannot continue pursuing representative penalties on behalf of others. 

2. Arbitration resolved the same underlying issues.

In Sorokunov, the arbitrator ruled against the employee on his individual Labor Code claims. Because his PAGA standing depended on those same alleged violations, the Court of Appeal held that he could not relitigate them in court and could no longer proceed as an aggrieved employee under PAGA.

3. Issue preclusion applied.

The court relied on issue preclusion, which bars a party from relitigating issues already decided in a prior proceeding. The ruling did not prevent the LWDA or other employees from pursuing their own claims; it only meant that this particular plaintiff could no longer maintain the representative PAGA action.

Arbitration Agreement Enforceability Still Matters

This strategy only works if the arbitration agreement itself is enforceable. In Sorokunov, the employee argued that NetApp’s agreement was illusory because the company supposedly had too much power to amend, suspend, or terminate it. The Court of Appeal rejected that argument and enforced the agreement. 

Key points include:

• NetApp’s agreement stated that any amendment had to be consistent with and permitted by applicable law. 

• The agreement also made clear that changes would not apply to disputes already in progress. 

• Those limits helped distinguish the agreement from more vulnerable arbitration provisions that give employers overly broad retroactive modification rights.

For employers, the takeaway is simple: even a strong PAGA defense strategy can fall apart if the arbitration agreement is drafted too broadly or too loosely. A well-written agreement is still the foundation of making this strategy work. 

Why This Matters for Employers

For employers, Sorokunov shows that arbitration agreements may do more than move a case into a different forum. In the right case, they may also help eliminate the named plaintiff’s ability to keep pursuing representative PAGA penalties. 

Key points include:

• Arbitration may provide a path to challenge the plaintiff’s standing to continue the representative PAGA case.

• Employers still need strong compliance practices and records to win on the underlying merits.

• Post-Viking River, an arbitration win may help narrow or even end representative PAGA exposure.

The lesson for employers and HR teams is clear: a strong arbitration agreement is valuable, but it is most effective when backed by solid wage-and-hour compliance. 

Employer Takeaways

1. Review arbitration agreements now.

Employers should review their arbitration agreements to make sure they are enforceable, current, and carefully drafted. A poorly drafted agreement may undermine the entire strategy before the employer ever reaches the merits. 

2. Pay close attention to amendment language.

If the agreement allows the employer to amend, suspend, or terminate the arbitration program, that language should be limited carefully. Attachment 2 specifically warns that modification language should be limited to future unknown claims, because failure to do so may create enforceability problems.

3. Do not treat arbitration as a substitute for compliance.

Arbitration only helps if the company can prevail on the underlying Labor Code issues. Employers should still audit payroll practices, commission plans, wage statements, reimbursement policies, and timekeeping systems. 

4. Preserve records tied to the plaintiff’s individual claims.

Because PAGA standing may turn on whether the named employee personally suffered a violation, employers should preserve the documents that speak directly to that issue, including compensation plans, payroll records, acknowledgments, policies, and dispute-resolution documents. This is the practical evidence that will matter if the employer seeks to defeat standing later. This point is an inference from the court’s standing and issue-preclusion analysis.

5. Do not assume a representative PAGA claim necessarily survives after arbitration begins.

That assumption is too broad after Sorokunov. The better question is whether arbitration has already resolved the same Labor Code issues on which the plaintiff’s PAGA standing depends. If it has, the employer may have a path to ending the representative case as well.

If your company is reviewing arbitration agreements, responding to a PAGA claim, or assessing California wage-and-hour compliance risks, our attorneys can help. Contact us at contact@consultils.com for strategic, employer-focused legal guidance.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Partner and Head of Litigation at ILS, Ted brings over a decade of experience handling complex commercial, employment, and wage-and-hour disputes for businesses. He has successfully represented clients before federal and state courts as well as private arbitration panels, achieving major wins that include multimillion-dollar jury verdicts, high-value settlements, and multiple pre-trial dismissals.

Before joining ILS, Ted represented both plaintiffs and defendants in civil rights, constitutional, and employment litigation. He worked alongside a retired Missouri Court of Appeals judge and assisted a U.S. magistrate judge during law school. This dual-sided, trial-to-appeal experience gives him a unique perspective to craft cost-effective, strategic solutions for clients.

Email:  contact@consultils.com | Phone: 626-344-8949