California Supreme Confirms Plaintiffs May Pursue Representative PAGA Claims in Court Even if Individual Claims are Compelled to Arbitration, While Providing Guidance on How to Litigate

Published July 26, 2023

By Shaye Schrick

On July 17, 2023, in Adolph v. Uber Technologies, Inc., the California Supreme Court ruled that an order compelling a plaintiff to arbitrate individual claims does not strip the plaintiff of standing to assert representative claims in court on behalf of other employees under the California Private Attorneys General Act (PAGA). In doing so, the Court confirmed that an agreement waiving the right to bring representative claims under PAGA is a violation of public policy, rendering it unenforceable, but also provided guidance for employers faced with arbitrable individual claims and judicial PAGA claims asserted on behalf of others.

Last year, in Viking River Cruises, Inc. v. Moriana, the United States Supreme Court held that employees who are compelled to arbitrate individual claims lose standing to pursue representative PAGA claims arising out of events involving other employees. In her concurring opinion, however, Justice Sotomayor opened the door for California to have the final word and take action to permit litigation of representative PAGA claims.  The California Supreme Court took that opportunity last week in Adolph v. Uber Technologies, Inc.

After considering the legislative intent behind PAGA—and departing from Viking River Cruises, Inc. v. Moriana—the California Supreme Court concluded that the Legislature intended to confer broad standing on all employees for alleged Labor Code violations.  Accordingly, it declined to hold that PAGA plaintiffs lose standing to litigate representative claims in court, despite an enforceable agreement compelling their individual claims to arbitration. As a result, even where enforceable arbitration agreements exist, employers may be subject to judicial PAGA litigation for representative claims.

In reaching its holding, however, the Court provided guidance for employers who are faced with arbitrable and non-arbitrable claims.  Under PAGA, an aggrieved employee is an individual: (1) who was employed by the alleged violator; and (2) against whom one or more of the alleged violations were committed.  Thus, when faced with a PAGA action by an employee who entered into a valid arbitration agreement, employers may seek a stay of the representative PAGA claims while the individual claims are arbitrated.  If the arbitrator determines that the plaintiff was an aggrieved employee and the court confirms that determination with a final judgment, the determination would be binding on the court and the plaintiff would continue to have standing to litigate the PAGA claims on behalf of others.  However, if the arbitrator determines that the plaintiff was not an aggrieved employee (i.e., the employer prevails on all claims) and the court confirms that determination with a final judgment, the employer may then move to dismiss the PAGA claims for lack of standing.

Employers should consult with their legal counsel to review their arbitration agreements and confirm they are in compliance with recent cases addressing arbitration generally and PAGA specifically.

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