U.S. Supreme Court to Decide the Fate of PAGA in California

Payne & Fears

On Dec. 15, the United States Supreme Court agreed to take up what promises to be the most consequential PAGA case in nearly a decade. 

In Viking River Cruises, Inc. v. Moriana, No. 20-1573, the Court will decide whether its 2018 decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which upheld the use of class and collective action waivers in employment arbitration agreements, effectively overruled the California Supreme Court’s 2014 decision in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), which held that arbitration agreements waiving the right to bring PAGA representative actions are unenforceable. In other words, the Court will decide whether employers may limit PAGA actions by way of employment arbitration agreements with representative action waivers, the same way they limit class actions through class action waivers. 

Since Iskanian, courts have consistently rejected employers’ attempts to enforce representative action waivers in employment arbitration agreements, reasoning that PAGA actions are distinguishable from traditional class actions. And for the last several years, courts have routinely used this same reasoning to reject arguments that Epic Systems applies to PAGA representative actions. It remains to be seen whether the Supreme Court will find this line between PAGA actions and class actions to be a distinction without a difference.

We will be monitoring this case closely. Should the Court rule in favor of the employer, this case has the potential to alter dramatically the wage-and-hour landscape in California by giving employers a powerful mechanism for minimizing, if not eliminating, PAGA claims.

The ultimate impact of this case will depend, however, on the outcome of yet another California arbitration dispute. As a reminder, the challenge to AB 51, California’s ban on mandatory employment arbitration agreements, remains active in the federal courts. A petition for rehearing of the Ninth Circuit’s decision in Chamber of Commerce v. Bonta, 13 F.4th 766 (2021), is pending.  Should that petition fail, a request for review by the U.S. Supreme Court is likely. 

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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