From JDSupra, Lisa Bowman, Katie Briscoe, Andrew Livingston, Amanda MacDonald, and Justin Washington discuss a recent case in California that permits and employee to pursue a representative class action claim even if the employee’s individual claim must be arbitrated. Lisa, Katie, Andrew, Amanda and Justin write:
The California Supreme Court issued its long-awaited ruling in Adolph v. Uber Technologies, Inc. on July 17, 2023, holding that an employee can pursue a non-individual representative action under the Private Attorneys General Act (PAGA) on behalf of other employees even after the employee’s individual claim has been compelled to arbitration.
This ruling breaks from the U.S. Supreme Court’s ruling in Viking River Cruises, Inc. v. Moriana and clears the way for California employees to pursue PAGA actions on behalf of other employees in court even where they are compelled to arbitrate their individual claims.
Background of Adolph v. Uber
The issue before the California Supreme Court in Adolph was whether an employee maintains standing under PAGA to pursue a representative PAGA claim “arising out of events involving other employees” where the employee had been compelled to arbitrate his individual PAGA claim. (An individual claim is the portion of a PAGA claim “premised on Labor Code violations actually sustained by” the employee.)
The U.S. Supreme Court held in Viking River last summer that:
- PAGA actions are severable into individual and non-individual claims.
- Individual PAGA claims can be compelled to arbitration if an agreement covered by the Federal Arbitration Act so provides.
- After an employee’s individual claim is compelled to arbitration, the employee loses standing to bring a representative PAGA action on behalf of other employees in court.
The decision was considered a win for employers. Indeed, before Viking River, the California Supreme Court’s 2014 ruling in Iskanian v. CLS Transportation Los Angeles, LLC, prohibited employers from enforcing pre-dispute PAGA waivers in arbitration agreements. In Viking River, however, the U.S. Supreme Court left the California Supreme Court with the final word on interpreting PAGA standing to bring the non-individual, representative claims in court under state law.
The Parties’ Arguments
In Adolph, Uber argued that since Viking River overruled Iskanian and permitted the court to compel arbitration of the plaintiff’s individual claim, the plaintiff’s remaining representative PAGA claim should be dismissed for lack of standing.
The plaintiff, however, countered that the only requirements for PAGA standing under California law, as stated in Kim v. Reins International California, Inc.,is that the plaintiff be an “aggrieved employee.” The plaintiff argued that an “aggrieved employee” has standing to pursue a PAGA claim in court on behalf of other employees, regardless of whether the individual claim is compelled to arbitration.
The Court’s Decision and Key Takeaways for Employers
Siding with the plaintiff, the Court concluded, “a plaintiff who files a PAGA action with individual and non-individual claims does not lose standing to litigate the non-individual claims in court simply because the individual claims have been ordered to arbitration.” The Court’s decision effectively nullifies the portion of Viking River holding that a plaintiff loses standing to bring a representative action in court after being compelled to arbitrate an individual claim.
Nonetheless, the ruling offered some glimmers of hope for employers:
- PAGA representative claims arguably should be stayed pending arbitration of the individual PAGA claim to save employers from simultaneously fighting PAGA claims in two forums.
- While Adolph noted that the trial court may exercise its discretion to stay the representative action, a stay is mandatory under CCP § 1281.4 except where claims are severable.
- Adolph confirms that sending an individual PAGA claim to arbitration does not sever a PAGA action.
- Defeating a plaintiff’s individual PAGA claim in arbitration defeats the representative PAGA claim, too. The Court held that, if an arbitrator concludes a plaintiff was not an “aggrieved employee,” the plaintiff “could no longer prosecute his non-individual claims due to lack of standing.”
In light of the Court’s decision, here are some actions employers can take:
- Continue to include PAGA waivers in arbitration agreements. These provisions are still enforceable to compel individual PAGA claims to arbitration, though that will not necessarily keep a PAGA representative claim out of the courtroom;
- Include provisions in agreements requiring a stay of non-arbitrable claims pending arbitration. That would pause representative PAGA claims pending in court until an arbitrator resolved the individual claims; and
- Include a severability clause to account for new developments in this area.