In June of last year, the United States Supreme Court held in Viking River Cruises, Inc. v. Moriana that a plaintiff in an action under the Private Attorney General Act (“PAGA”) loses standing to pursue claims on behalf of other employees when their individual claims are compelled to arbitration. We previously discussed this potentially momentous decision here. This led to a flurry of revisions to employers’ arbitration agreements in 2022 as the decision had the potential to whittle down multi-million dollar liability to something much smaller. Today however, the California Supreme Court held in Adolph v. Uber Technologies that the Supreme Court misinterpreted California law and that plaintiffs do not lose standing to pursue claims on behalf of other employees when their individual claims are compelled to arbitration. So, the Viking River decision becomes far less impactful for California employers. Yet, the California Supreme Court did offer some solace in the form of an alternate strategy discussed below.
Can Employers Still Compel Individual PAGA Claims to Arbitration?
Yes, if the Federal Arbitration Act (“FAA”) applies to the agreement, the Viking River decision still allows arbitration of the plaintiff’s individual claims (the violations they personally suffered). Prior to Adolph, the hope for many employers was that they could dismiss the representative claims when the individual claims moved to arbitration, thereby drastically shrinking the scope of the PAGA action. That is not the case after today’s decision. When an individual PAGA claim is compelled to arbitration, the representative claims survive in court. However, the court did provide an alternative which could prove very helpful to employers in the right case. The Court suggested that if an individual claim was compelled to arbitration, the Court could press pause and stay the representative claim in court pending the arbitrator’s decision. If the arbitrator finds that the plaintiff did not personally suffer any violations then they would lose standing to pursue their representative claims. So, if you are faced with a PAGA action it is best to discuss this strategy with your counsel to determine if it could prove useful in your case.
Should Employers Re-Amend Their Arbitration Agreements?
For those employers which amended their arbitration agreement to take advantage of the Viking River decision now is the time to take another look at those revisions. Depending on the specific revisions implemented, no action may be necessary as provisions which now run contrary to the Adolph decision can be severed. We suggest discussing your arbitration agreement with your labor counsel to make sure you are complying with this recent decision.
What’s Next For PAGA?
Given today’s decision, PAGA’s opponents should turn their attention to the Fair Pay and Employer Accountability Act, which seeks to significantly limit PAGA and return to the pre-2004 days when the Labor Commissioner, and not the courts, determined most claims based on alleged violations of the Labor Code. A coalition of farmers, car dealers, trucking companies and other industry groups pushing the proposed initiative said that they now intend to get the initiative on the 2024 ballot. While this legislation does not provide relief to employers in the short term, we will keep employers apprised of any developments on this front.
