California Supreme Court Averts SCOTUS Viking River Decision, Allowing Litigation of PAGA Claims Despite Arbitration Agreement

Stokes Wagner

Last year, the U.S. Supreme Court issued an employer-friendly decision in Viking River Cruises v. Moriana. There, it held that the Federal Arbitration Act (FAA) preempts the California Private Attorneys General Act (PAGA) such that employees who signed arbitration agreements could not avoid arbitration of their individual PAGA claims and, once their own dispute was “pared away from a PAGA action,” they lacked statutory standing to maintain their non-individual claims in court. While many employers hoped Viking River would end PAGA claims altogether, the Supreme Court left the door open for a contrary ruling from California courts, as Justice Sotomayor’s concurring opinion in Viking River foretold: “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” (Viking River, 142 S.Ct. at 1925 (conc. opn. of Sotomayor, J.))

On Monday, July 17, 2023, noting that it was “not bound by the high court’s interpretation of California law”, the California Supreme Court deviated from Viking River in the highly anticipated Adolph v. Uber Technologies, Inc. decision. The California Supreme Court ruled that “an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.” Thus, although Adolf signed an arbitration agreement requiring any employment related disputes be submitted to arbitration, he was nonetheless allowed to bring a representative claim in court on behalf of others. Uber is now considering their appellate options.

Several amici who supported Uber sought to persuade the court to “narrow the statute’s standing requirements in order to curb alleged abuses of PAGA.” The court indicated such arguments were best directed to the Legislature.

As a result of this ruling, we expect to see a steady increase of PAGA claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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