One month after the U.S. Supreme Court rejected California’s ban on enforcing agreements that require the individual arbitration of claims under the Private Attorneys General Act of 2004, the California Supreme Court granted review in Adolph v. Uber Technologies, Inc.

In Adolph, the state Supreme Court held that a plaintiff employee who was compelled to arbitrate his or her own PAGA claims based on Labor Code violations still has standing to pursue PAGA claims in the courts on behalf of other employees.

Lawyers and judges throughout the state assumed Adolph would resolve whether, after arbitration of the PAGA claim based on violations experienced by the plaintiff, the same plaintiff could go to court on the merits of the PAGA claims based on violations experienced by coworkers.

It did not.

The Adolph decision is limited to the issue of standing. Thus, arguably a PAGA plaintiff whose individual claim is sent to arbitration has still waived the right to proceed based on “events involving other employees.”

What is a “representative”?

To appreciate the holdings in the U.S. Supreme Court decision in Viking River Cruises v. Moriana and the California Court’s decision in Adolph, it is important to first understand the two contexts in which the term “representative” is used in PAGA jurisprudence. In the first context, PAGA claims are “representative” claims insofar as they are qui tam (a Latin term meaning “in the name of the king”) actions brought by employees as proxies for the State of California. In other words, a plaintiff who brings a PAGA claim does so as a representative of the State.

The second meaning of “representative” is that a PAGA plaintiff seeks to recover civil penalties not just for violations experienced personally, but also for violations experienced by other employees. In other words, it is similar to a class action lawsuit, in which a plaintiff acts on behalf of similarly situated individuals.

California precedent holds that an arbitration agreement cannot require an employee to categorically waive the right to assert a PAGA claim as a representative of the State. Viking River Cruises and Adolph do not disturb that holding. Accordingly, the rest of this bulletin uses “representative” in the second context: that of a plaintiff who brings a PAGA claim on behalf of other employees.

Viking River Cruises

In Viking River Cruises, the U.S. Supreme Court reaffirmed that the Federal Arbitration Act mandates the enforcement of bilateral agreements requiring the arbitration of claims on on an individual basis (that is, class waivers). Viking River Cruises overruled the California Supreme Court’s 2014 decision in Iskanian v. CLS Transp. Los Angeles, LLC, to the extent that Iskanian held that PAGA claims could not be compelled to individual arbitration. In Iskanian, the court had ruled that PAGA claims are incapable of division into “individual” and “representative” components.

As a result of Viking River Cruises, if a plaintiff brings a PAGA claim seeking to recover penalties for both personal violations and violations experienced by others, the claim can now be divided into individual and representative components, and the plaintiff can be required to arbitrate the individual component.

But Viking River Cruises did not explicitly resolve what happened to the representative portions of the PAGA claim. Should they be dismissed, as in a class action? Does the plaintiff maintain standing to purse the representative components even after the individual components have been sent to arbitration?

Enter Adolph.

Adolph

In Adolph, the California Supreme Court held that a plaintiff who has been compelled to arbitrate individual PAGA claims still has standing to pursue representative PAGA claims in court. The Court reasoned that the text of the PAGA statute has only two requirements for standing – first, that the plaintiff have been employed by the alleged violator, and second, that the plaintiff be “aggrieved” insofar as he or she suffered at least one Labor Code violation.

Critically, Adolph addresses only statutory standing under state law (where Article III standing principles do not apply). The fact that a party has standing to assert a claim does not settle whether the party may actually litigate the merits of the claim. Claims are routinely dismissed for a variety of reasons unrelated to standing.

And indeed, when putative class claims are dismissed based on an order compelling individual arbitration, standing is not the issue. Instead, the class claims are being dismissed because the FAA requires enforcement of the plaintiff’s agreement to arbitrate individually. The same rationale should apply to PAGA claims post-Viking River Cruises.

Moving forward

The early consensus among both plaintiff-side and defense-side employment practitioners has been that Adolph leaves a PAGA plaintiff free to pursue representative PAGA claims even after the plaintiff’s individual claims have been sent to arbitration, effectively nullifying any positive impact of Viking River Cruises.

We are more optimistic. Although the issues surrounding the waiver of the representative components of PAGA claims are unlikely to be settled in the next few years, employers should be able to rely on Viking River Cruises to argue that once the individual component of a PAGA claim is sent to arbitration, the representative components should also be dismissed.

We also recommend that employers review their arbitration agreements with outside counsel to ensure they include representative action waiver language crafted to take full advantage of the holdings in Viking River Cruises and Adolph.