California Supreme Court Rules that PAGA Claims May Be Pursued in Court Despite Arbitration Agreement
California Supreme Court Rules that PAGA Claims May Be Pursued in Court Despite Arbitration Agreement

Following the United States Supreme Court’s landmark ruling in Moriana v. Viking River Cruises, California courts were tasked with the open question of whether an “aggrieved” employee whose individual Private Attorneys General Act (PAGA) claims are subject to an arbitration agreement has standing to represent other similarly aggrieved employees in Superior Court.  In Adolph v. Uber Technologies, Inc., the California Supreme Court answered that question in the affirmative; a representative employee’s standing to represent others is not affected by any existing arbitration agreement.

Asserting its singular authority to interpret the PAGA statute, the California Supreme Court rejected the United States Supreme Court’s non-binding portion of its opinion in Moriana.  Specifically, the California Supreme Court relied on its previous ruling in Kim v. Reins International California, Inc. in which it found that an aggrieved employee does not lose standing to represent other aggrieved employees when the individual’s claims are settled out of court.  The Court extended this reasoning to an employee’s claims which have been ordered to arbitration.  According to the Court, standing to represent others in a PAGA action does not turn on the viability of the individual’s claims.  Rather, because the individual stands in the shoes of the State of California as an enforcer, it is the State who maintains the standing to proceed with the action.

The Takeaway:

What does this ruling mean for employers? Practically speaking and to the dismay of employers throughout the state, there is no change to the current legal landscape; the status quo is maintained.  Following the ruling in Adolph, even if an employer has a binding and enforceable arbitration agreement with an employee that includes a PAGA arbitration provision, that employee can still represent others and bring PAGA claims against the employer for Labor Code violations in Superior Court, despite having that employee’s individual claims separated and adjudicated in the arbitration forum.  It remains to be seen whether Uber will appeal this ruling to the United States Supreme Court.  If and until then, employers that favor arbitration agreements with employees will be obligated to litigate in two forums when PAGA claims are alleged.

This publication is published by the law firm of Ervin Cohen & Jessup LLP. The publication is intended to present an overview of current legal trends; no article should be construed as representing advice on specific, individual legal matters. Articles may be reprinted with permission and acknowledgment. ECJ is a registered service mark of Ervin Cohen & Jessup LLP. All rights reserved.


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