Seyfarth Synopsis: The California Supreme Court held that a plaintiff whose individual PAGA claims are compelled to arbitration retains standing to pursue representative PAGA claims in court in Adolph v. Uber Technologies, Inc., meaning that their claims may live on way past the first volley.

Wimbledon may be over but, on Monday, the California Supreme Court returned Viking River’s serve and took the match with its highly anticipated decision in Adolph v. Uber. The headline? A plaintiff whose individual PAGA claims are compelled to arbitration retains standing to pursue representative PAGA claims in court.

Game

Those following the play at home may remember the California Supreme Court’s 2014 decision in Iskanian v. CLS Transportation. Iskanian set the rules of play that PAGA claims could not be split into their individual and representative parts. It also said the right to bring a PAGA claim in court was unwaivable, using the dropshot to make otherwise enforceable arbitration agreements inapplicable to these claims. As a result, for many years California employers were forced to defend against PAGA claims in Court even where employees signed arbitration agreements with class and representative action waivers.

Set

Iskanian lasted nearly a decade as good law—a lifetime in PAGA litigation—until the U.S. Supreme Court issued last year’s decision in Viking River. As we previously blogged about, SCOTUS held that the FAA preempted California’s rule preventing courts from dividing PAGA actions. PAGA actions could be split, and an employee’s individual PAGA claims could be compelled to arbitration. Without the individual claims though, a PAGA plaintiff lacked standing to pursue the representative claims and those claims had to be dismissed.

But Justice Sotomayor noted in dissent that the majority’s foot may have been on the line when it issued its decision. She warned that California law would govern what happens to a PAGA plaintiff’s representative claims after the individual claims are compelled to arbitration and, under the right circumstances, California courts would “have the last word.”

Match

Taking Justice Sotomayor up on her invitation, the California Supreme Court held in Adolph that an order compelling a PAGA plaintiff’s individual claims to arbitration does not strip the plaintiff of standing to pursue representative claims in court. The Court relied heavily on the legislative purpose of PAGA, as well as statutory language establishing (in the Court’s view) that a worker achieves PAGA standing if they have had one Labor Code violation committed against them by their employer.

In sending Uber’s volleys back to their side of the net, the Court also resolved several other points concerning the litigation of PAGA actions, including:

• The outcome of a PAGA plaintiff’s individual arbitration will be binding on issues of standing. If the plaintiff prevails at individual arbitration, they get to keep the representative claims and pursue them. If the plaintiff loses, they do not.
• Sending an employee’s individual PAGA claims to arbitration does not split the underlying PAGA action into two cases. The PAGA action remains a single case that is subject to the mandatory stay provisions of applicable California statutes.

Takeaways For Those In The Stands

Although California may have taken the match, points were scored for employers.

15 – Under Adolph, employers can (and ought to) vigorously defend against individual PAGA claims in arbitration knowing that, if they prevail, the plaintiff will be unable to proceed with their representative PAGA claims. Going to individual arbitration first should allow employers the chance to defeat an individual PAGA plaintiff’s claim without facing the burden and expense of responding to overbroad discovery and fishing expeditions requesting information as to every non-exempt employee.

30 – Even if the individual defense in arbitration is unsuccessful, employers retain the ability to challenge a plaintiff’s representative claims on substantive and/or procedural (e.g., manageability) grounds.

40 – Because the Court specifically held that ordering an employee’s individual claims to arbitration does not sever a PAGA action, trial courts should apply a mandatory stay to the representative PAGA claims pending the outcome of individual arbitration, potentially tying up any kind of representative litigation for an extended period of time.

The winner of the game thus remains undetermined.

Workplace Solutions

The fight over PAGA claims is far from over, and the next tournament is right around the corner. Other important decisions are still pending from the California Supreme Court and talk of proposed ballot measures that would make wholesale changes to the PAGA framework. Employers wanting to stay up to date on the latest should be in touch with their Seyfarth attorney to ensure they do not miss any important updates in this developing area of the law.