As most employers in California are aware, in June of 2022, the U.S. Supreme Court held in Viking River Cruises, Inc. v. Moriana (“Viking River”) that Private Attorney General Act (“PAGA”) actions could be split into individual and non-individual claims and the individual claims could be subject to arbitration. The Court expressed its view that once a Plaintiff is ordered to arbitration, his or her non-individual claims (i.e., the representative PAGA claims) should be dismissed, on the basis that the Plaintiff no longer had standing to maintain the court action, but because PAGA was a state statute, the Court explicitly left open this question for the California Supreme Court to decide according to state law.
So, just this week, on July 17, 2023, in Adolph v. Uber, the California Supreme Court did not rule in accordance with the views expressed by the U.S. Supreme Court, instead ruling that an order compelling arbitration of individual claims in a PAGA lawsuit does not strip the Plaintiff of standing to represent and litigate the non-individual (i.e. PAGA) claims in court.
What You Need to Know About the Ruling:
New Guidelines for PAGA Actions: The Court provided both employers and the lower courts with guidance on the proper procedure for PAGA claims with arbitration agreements. The individual claims will be resolved through arbitration, while non-individual PAGA claims should be put on hold in court until the outcome of the individual claim arbitration is determined. This streamlined approach ensures efficiency, avoids redundant litigation, and prevents unnecessary strain on court resources.
Employees Lose Standing if They Take Nothing at Arbitration: Unfortunately, employers will still face the possibility of non-individual PAGA lawsuits, even if individual PAGA claims are directed to arbitration. However, should the arbitrator find that the individual did not experience any wage and hour violations, courts will likely conclude that the individual is not an “aggrieved” party, thereby losing the right to pursue non-individual action.
Potential Changes on the Horizon: Since this ruling contradicts the U.S. Supreme Court, attention is now shifting towards a proposed ballot measure discussed in our previous blog post. Known as the “California Fair Pay and Employer Accountability Act of 2024,” this measure aims to eliminate PAGA altogether and introduce heightened DLSE (Division of Labor Standards Enforcement) enforcement. Consequently, efforts to repeal PAGA entirely may gain traction in the coming months.
It is crucial for employers to grasp the implications of this ruling and take appropriate measures to protect their interests. Employers must review and potentially revise their arbitration agreements to ensure compliance with the principles outline in both the Viking River and Adolph v. Uber cases, including ensuring that there is not an impermissible “wholesale waiver” of PAGA and that the agreement contains a severance clause. Employers should also assess the cost-benefit of their current arbitration practices.
A full evaluation of not only your arbitration agreements, but also your current employment policies and practices, and wage and hour compliance and training is necessary to ensure that your company is up-to-date with the quickly changing legal landscape in California. As always, the attorneys from RPNA are here to answer questions and assist with your needs. Please contact, Nicholas Roxborough (npr@rpnalaw.com), Michael B. Adreani (mba@rpnalaw.com), Trevor Witt, (trw@rpnalaw.com) or Muhammed Hussain (mth@rpnalaw.com) with any questions. They are also available at 818-992-9999.
