Last week, the U.S. Supreme Court issued a decision in Viking River Cruises, Inc. v. Moriana which permits arbitration of an individual California Private Attorneys General Act (PAGA) claim. The Court held further that because PAGA has no mechanism to enable a court to adjudicate non-individual PAGA claims once the individual claim is committed to a separate proceeding, the individual no longer has standing to litigate the PAGA claim on a non-individual basis.
As employers will recall, PAGA was enacted in 2004 and allows any aggrieved employee to bring an action against an employer on their own behalf, as well as on the behalf of other employees. PAGA permits employees to recover civil penalties on behalf of the State of California, retaining 25 percent while remitting 75 percent to the California Labor & Workforce Development Agency (LWDA), as well as recover attorneys’ fees and costs. This led to a significant risk for employers who might be facing multiple technical violations from employees and former employees, which add up quickly even for small employers. Prior to the Viking River Cruises decision, pre-dispute waivers of PAGA claims were continually held unenforceable and thought to be against public policy since the dispute was between the employer and the State of California. Many plaintiff employees file PAGA lawsuits to avoid arbitration.
The Viking River Cruises, Inc. v. Moriana decision changes the game and should allow employers with enforceable arbitration agreements that contain a PAGA waiver (and an enforceable severability clause depending on the language contained in the arbitration agreement) to compel a plaintiff employee to arbitrate their individual PAGA claim, with no ability to pursue PAGA claims on behalf of other individuals.
Action Items for Employers
Employers who are currently in active litigation involving PAGA claims should be evaluating whether to bring a motion to compel the litigation to arbitration to limit the claims to those personally suffered by the plaintiff employee and seek to have dismissed the employee’s non-individual PAGA claims alleged on behalf of other employees.
Employers with arbitration agreements in place should have their arbitration agreements reviewed to ensure they contain language mandating arbitration of the employee’s PAGA claim, as well as a proper severability clause. And employers without arbitration agreements may wish to reassess whether they should be implementing arbitration agreements now in light of the favorable ruling.
While employers should be rejoicing in this ruling, the California Legislature may act to amend PAGA to allow individuals who are required to arbitrate their individual claims, a way to pursue representative claims on behalf of others. Thus, employers will need to remain apprised of the ever-changing legal landscape involving PAGA.
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