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The California Supreme Court decided Adolph v. Uber Technologies on July 17, 2023. As widely expected, the court ruled that an employee may bring “non-individual” or “representative” claims on behalf of other employees and the State of California under the Labor Code Private Attorneys General Act (PAGA) in court, even if the employee is required to submit their own individual PAGA claims for civil penalties to arbitration.
This is the same result reached by five earlier decisions by the state Court of Appeal, some of which we reported on in March 2023. But it is the opposite of the position taken by the United States Supreme Court in its June 2022 decision in Viking River Cruises v. Moriana.
As we reported last year, under Viking River, employees covered by arbitration agreements and the Federal Arbitration Act may be compelled to arbitrate their own individual PAGA claims. Because this ruling involves federal law, it is binding on all lower federal and state courts—including the California Supreme Court—and is not impacted by the decision in Adolph.
The U.S. Supreme Court in Viking River also stated that an employee whose individual penalty claims are ordered to arbitration loses “standing” to bring representative PAGA claims in court, and that representative PAGA claims should be dismissed in such cases. However, because this is an issue of California state law, the California Supreme Court was not bound by the U.S. Supreme Court’s reasoning, and was free to reject it—which is exactly what it did in Adolph.
The California Supreme Court focused on the language of PAGA, which requires an employee to allege they: (1) were employed by the alleged violator; and (2) had one or more of the alleged violations committed against them. The court has repeatedly refused to add “standing” requirements on top of those stated in PAGA. For example, in a 2020 decision (Kim v. Reins International California), the court ruled that an employee may continue with non-individual PAGA claims even after settling and dismissing his own individual claims for damages.
The Supreme Court reached a similar result in Adolph as it did in Kim. In both cases, the employees claimed they experienced Labor Code violations while employed by the defendants. In both cases, the Supreme Court ruled this was enough to allow the employees to bring non-individual PAGA claims—irrespective of any settlement and dismissal of individual claims (Kim) or agreement to arbitrate individual PAGA claims (Adolph).
The news from Adolph isn’t all bad for employers. Under Viking River, employers may continue to enforce agreements to arbitrate individual PAGA claims. Adolph indicates it’s appropriate for courts to stay non-individual PAGA claims until after the completion of arbitration on an individual PAGA claim. The results of that arbitration could have binding effect on the non-individual claims in court.
For example, if an arbitrator found the employee was not “aggrieved” by any PAGA violation, and that decision resulted in a final judgment, the courts would have to honor that finding, and the employee could not continue to pursue representative PAGA claims in court. On the other hand, if an arbitrator found the employee was “aggrieved,” the employer would be stuck with that finding in a non-individual action in court. This is the result a Court of Appeal decision reached earlier this year in Rocha v. U-Haul Company of California. The Supreme Court in Adolph made clear it agreed with Rocha, and that this result is required under Viking River.
In light of Adolph, California employers may continue to compel employees with enforceable arbitration agreements to submit their individual penalty claims to arbitration. However, employees’ representative PAGA claims will not be dismissed for lack of standing—unless an arbitration decision results in a final judgment that the employee was never “aggrieved” by any PAGA violation in the first place.
We continue to encourage California employers to consider presenting arbitration agreements to their employees. These agreements should not waive the right to bring PAGA claims, because those waivers are unenforceable under California law. However, the agreements may require employees to submit their individual PAGA claims to arbitration. If you have any questions on how to proceed, please call your firm contact at 818-508-3700 or visit us online at www.brgslaw.com.
Sincerely,
David J. Fishman
John J. Manier
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