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In a made-for-TV example of legal whiplash, the California Supreme Court solidified an aggrieved California employee’s ability to pursue non-individual Private Attorneys General Act (PAGA) claims when their individual claims have been compelled to arbitration. In Adolph v. Uber Technologies, Inc., the California Supreme Court addressed the pending question from Viking River Cruises v. Moriana as to whether an aggrieved employee who has been compelled to arbitrate individual PAGA claims has statutory standing to pursue non-individual PAGA claims. On July 17, 2023, the California Supreme Court answered with a resounding yes.  

PAGA claims have been a bone of contention with employers since the legislation was enacted in 2004. PAGA actions allow aggrieved employees to act as attorneys general and initiate an action against an employer on behalf of themselves and other current or former employees for violations of California labor laws. Successful plaintiffs receive 25% of the penalties associated with the employer’s labor code violations, while the California Labor and Workforce Development Agency (LWDA) receives the other 75%. In 2014, Iskanian v. CLS Transportation Los Angeles LLC confirmed that state law precludes the division of PAGA claims through arbitration agreements into individual and non-individual actions because the PAGA statute serves an important public interest in enforcing labor code violations and incentivizes compliance by employers.  

In June 2022, employers received the long-awaited ruling they were looking for in Viking River Cruises, Inc. v. Moriana. In Viking River, the U.S. Supreme Court overruled Iskanian, holding that the Federal Arbitration Act (FAA) preempts the rule in Iskanian as far as it precludes division of PAGA actions into individual and non-individual claims through arbitration agreements. Viking River suggested that since these claims cannot be divided, the state should dismiss the non-individual PAGA actions due to lack of standing.  

As California employers were cautiously celebrating the Viking River ruling and hoping it was the end of non-individual PAGA claims, the California Supreme Court said not so fast. In Adolph v. Uber Technologies, Inc., the California Supreme Court followed the road map laid out by U.S. Supreme Court Justice Sotomayor in her concurring opinion in Viking River, stating that in an appropriate case, California Courts will have the last word on the interpretation of state law. The California Supreme Court has issued the last word, for now, ruling that a PAGA plaintiff does have standing to bring non-individual PAGA claims even if their individual PAGA claim was compelled to arbitration.  

Although this appears to be an unfavorable ruling for employers in California, there is still a bit of hope for managing these cases. In Adolph, the court did offer some helpful suggestions for these PAGA cases: 1) that non-individual actions should be stayed pending the outcome of the individual PAGA arbitration, and 2) if the employer wins the individual PAGA arbitration, the employee should lose standing to pursue the non-individual PAGA claim. How this plays out remains to be seen. 

Despite this ruling, there are strategies employers can take as it relates to current or revised arbitration agreements and managing these claims. If you would like to discuss these strategies and how this ruling affects your organization’s use of arbitration agreements, contact the California Legal Services team at CAInfo@employerscouncil.org.