Several employment-related cases are currently pending before the California Supreme Court, and their outcomes could have a significant impact on workplace policies and risk management for employers and HR professionals.

Fuentes v. Empire Nissan, Inc.

 This case addresses whether a form arbitration agreement required as a condition of employment is unenforceable due to unconscionability.

The California Court of Appeal held that the employee failed to establish substantive unconscionability to invalidate the arbitration agreement. The court emphasized that complaints about tiny, blurry, “visually impenetrable” font and the adhesive, take‑it‑or‑leave‑it presentation go to procedural unconscionability only and cannot be double counted as substantive defects.

If the California Supreme Court upholds the lower court’s decision in Fuentes, employers may have more confidence in the enforceability of form arbitration agreements, even when presented as take-it-or-leave-it conditions of employment, so long as complaints about the form agreements center only on procedural unconscionability and not substantive defects. However, employers should still ensure their agreements are clear and fair to reduce the risk of challenges based on unconscionability.

Hern v. Pacific Gas & Electric Co.

In this case, the California Supreme Court will clarify whether a terminated employee can bring a defamation claim against a former employer if the alleged defamation contributed to their termination, or if such claims must be pursued under a wrongful discharge theory.

Hearn sued for Labor Code section 1102.5 retaliation and defamation based on statements in internal administrative reports, a labor relations email seeking termination approval, and the termination letter. A jury rejected retaliation but found defamation liability solely as to an internal investigation report, concluding those statements were not substantially true and were made with malice, and awarded economic and noneconomic damages.  The Court of Appeal reversed the defamation claim holding an employee cannot obtain tort recovery where the tort is merely the means to the end of termination and the only injury results from the discharge.

If the California Supreme Court affirms the appellate court’s decision, employers may face reduced exposure to defamation claims from terminated employees when the alleged defamatory statements are closely tied to the termination itself, reinforcing the need to address such claims primarily under wrongful discharge theories rather than as separate tort actions.

Leeper v. Shipt, Inc.

This case addresses whether every Labor Code Private Attorneys General Act (PAGA) action necessarily includes both individual and non-individual claims, and whether a plaintiff can choose to bring only a non-individual PAGA action, also known as a “headless PAGA” claim.

Leeper worked as a “shopper” for Shipt under an independent-contractor agreement that contained a broad arbitration clause governed by the Federal Arbitration Act. In 2024, she filed a PAGA action against Shipt, alleging that she and other workers were misclassified as independent contractors and denied various protections under the California Labor Code. Importantly, Leeper’s complaint expressly stated that she was bringing only non-individual, representative PAGA claims on behalf of the State of California and other employees and not pursuing any individual PAGA claim of her own. Shipt moved to compel arbitration, arguing that any “individual” component of her PAGA claim fell within the arbitration agreement. The trial court denied the motion, but the Court of Appeal reversed, holding that every PAGA action necessarily includes both an individual and a non-individual (representative) component. The court reasoned that under Labor Code section 2699(a), an “aggrieved employee” always acts “on behalf of the employee and other employees,” meaning Leeper could not avoid arbitration by disclaiming her own individual PAGA claim. Accordingly, the appellate court directed the lower court to compel arbitration of Leeper’s individual PAGA claim and stay the representative portion of the case pending the outcome of arbitration.

If the California Supreme Court upholds the appellate court’s decision in Leeper, employers may gain greater leverage in compelling arbitration of individual PAGA claims, limiting the scope of representative PAGA actions, and reducing potential exposure to broad, state-wide PAGA litigation.

If you have questions about any of these cases or related issues, contact a Jackson Lewis attorney to discuss.