When Winning in Arbitration Still Isn’t the End

Why Prime Healthcare and Rodriguez Reveal a Deeper Divide About PAGA Standing

In the wake of recent PAGA decisions, many employers have operated under a practical assumption: if you win in arbitration, the case is effectively over. The Court of Appeal’s recent decision in Prime Healthcare Management, Inc. v. Superior Court (12/15/25) challenges that assumption—not by announcing a new rule, but by reaffirming, as law of the case, that an arbitration win does not necessarily resolve PAGA exposure.

The employer in Prime Healthcare prevailed in arbitration—yet the PAGA case survived. That outcome is especially striking when compared with Rodriguez v. Lawrence Equipment (2024), where an arbitration win ended the PAGA action entirely. Same statute. Similar wage-and-hour allegations. Very different results.

The explanation is not that courts have changed the requirements of PAGA. Courts still agree on the basic rule: only an “aggrieved employee,” meaning someone who personally experienced at least one Labor Code violation, may pursue civil penalties on the State’s behalf. What has changed is how courts decide whether arbitration has actually resolved the question—or merely brushed it aside.

Two arbitration wins, two very different endings

In Rodriguez, the arbitrator confronted the merits directly. After evaluating the evidence, the arbitrator issued a take-nothing award, rejecting the employee’s wage-and-hour theories and concluding that the alleged Labor Code violations were not proven. The trial court confirmed that award.

From there, the Court of Appeal’s reasoning was straightforward. If PAGA standing depends on at least one Labor Code violation, and an arbitrator has finally adjudicated the pleaded violations against the employee, then the employee cannot be an “aggrieved employee.” Standing failed as a matter of law. The PAGA case ended.

What made that outcome possible was not the label attached to the claims, but the decision's finality and scope. The arbitrator had resolved the factual predicates on which PAGA standing depends, leaving no unresolved violation for the court to assess and nothing for the court to infer.

Prime Healthcare pursued a different path, even though the employer prevailed again in arbitration. There, the arbitrator ruled in the employer’s favor on the employee’s wage-and-hour claims, finding that the employee was exempt. No individual PAGA claim was submitted to arbitration, and the arbitrator did not decide whether the employee was an “aggrieved employee” for purposes of PAGA.

When the employer later argued that this arbitration victory eliminated PAGA standing, the Court of Appeal disagreed. The court emphasized that the arbitration had not been positioned to resolve the standing-critical issue and that the arbitrator had not made a PAGA-relevant determination on the State’s behalf. A ruling that the wage-and-hour rules did not apply in a private dispute, the court explained, was not the same thing as a determination that no Labor Code violation occurred for PAGA purposes.

On that basis, the court refused to treat the arbitration award as having resolved standing. The PAGA claim proceeded.

What the disagreement is really about

Prime Healthcare acknowledges—but ultimately declines to follow—Rodriguez and similar cases when analyzing how arbitration affects PAGA standing in this posture. The disagreement concerns neither employee protections nor the elements of PAGA. It is about authority.

At bottom, courts are grappling with whether a private arbitration process should be permitted to decide a gateway issue that determines whether the State may pursue civil penalties at all. Rather than addressing that authority question head-on, courts are resolving it through standing doctrine.

That is where the concept of “submission” enters the analysis in Prime Healthcare. The employer argued that because the arbitrator had ruled in its favor, the employee necessarily lacked PAGA standing. The Court of Appeal rejected that framing, not because arbitration is irrelevant to standing, but because the arbitration had never been positioned to decide it. The court emphasized that no individual or representative PAGA claim had been placed before the arbitrator and that the arbitrator never made a PAGA-relevant determination as to whether the employee was an “aggrieved employee.” Against that backdrop, the court asked a narrower question: was the arbitrator ever authorized to decide the standing-critical issue on the State’s behalf, or was the arbitrator merely resolving a private dispute between the parties?

In Prime Healthcare, the court concluded it was the latter. It refused to allow standing to disappear by implication—through arbitration of non-PAGA claims alone—without the arbitrator ever being empowered to decide anything on the State’s behalf.

What Prime Healthcare does—and does not—foreclose

Importantly, Prime Healthcare does not hold that arbitration can never affect PAGA standing. Nor does it state that arbitrators are categorically barred from deciding issues of standing.

What it rejects is the idea that standing can be eliminated accidentally. If an arbitrator is going to decide the factual predicate of PAGA standing, that decision must be made deliberately, in a posture that authorizes the arbitrator to act as a gatekeeper to State enforcement—not inferred after the fact from overlapping findings.

Where an arbitrator is expressly authorized to decide whether an employee suffered a PAGA-qualifying Labor Code violation—such as when an individual PAGA claim is compelled to arbitration and the arbitrator resolves that issue on the merits—the concerns driving Prime Healthcare largely fall away. What the court insists on is clarity, not formalism.

Why this matters for in-house legal teams

For in-house counsel, the lesson is not that arbitration has lost value. It is that PAGA exposure has become a lifecycle issue, not a single procedural moment.

Arbitration outcomes are now read, sometimes years later, through the lens of authority and posture. Legal teams are increasingly asked not just who won, but what was actually decided, and whether the arbitrator was acting in the proper role in making that decision. That is a different kind of risk assessment from the one many employers are accustomed to making.

This also explains why arbitration agreements and arbitration records are receiving renewed attention. Courts are not looking for clever drafting. They are looking for evidence of the authority exercised and the questions actually resolved.

Where this leaves employers

PAGA is not becoming more unpredictable because courts disagree about worker protections. It is becoming more nuanced as courts continue to define where private dispute resolution ends and public enforcement begins.

For now, one takeaway is clear: winning in arbitration is not always the same as ending the case. Courts are increasingly focused on whether arbitration actually resolved the standing-critical question—whether the employee was ever “aggrieved” in the first place.

Understanding that distinction, and how it plays out across forums, is increasingly central to managing PAGA risk.

Disclaimer:
This article is for general informational purposes only and does not constitute legal advice. Legal outcomes depend on specific facts, procedural posture, and evolving case law. Employers should consult experienced counsel regarding their particular circumstances.