May 23, 2022

Volume XII, Number 143

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May 20, 2022

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Supreme Court to Consider Whether the FAA Mandates Arbitration of PAGA Actions

On Dec. 15, 2021, the United States Supreme Court granted certiorari in Viking River Cruises, Inc. v. Moriana, and likely will decide by summer 2022 whether the Federal Arbitration Act (FAA) preempts California public policy and requires enforcement of arbitration agreements that purport to waive an employee’s ability to pursue representative actions under the California Private Attorneys General Act (PAGA). Employers have been waiting for the Supreme Court to take up this issue and are watching the case with interest.

Currently, per the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC, arbitration agreements that waive an employee’s right to pursue PAGA representative actions are considered void and unenforceable. In Iskanian, the California Supreme Court held the FAA does not preempt California state law prohibiting prospective PAGA waivers because PAGA actions are between the employer and the state, not the employee. Thus, the state of California is the real party in interest, not the employee bringing suit, and although the employee may have executed a binding arbitration agreement, the state of California did not. Thus, arbitration agreements that purport to waive the right, expressly or otherwise, to bring a PAGA representative action are not enforceable.

In Viking River, the employee filed a PAGA representative action seeking civil penalties for various alleged violations of the California Labor Code, despite signing an arbitration agreement with her employer agreeing to resolve all future employment-related disputes with the employer via individual arbitration. Relying on the agreement, the employer moved to compel the action to arbitration. The trial court denied the motion, and the Court of Appeal affirmed the denial citing California state law as articulated in Iskanian. The California Supreme Court subsequently denied the employer's petition for review.

Viking River then petitioned the U.S. Supreme Court for certiorari, relying on the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion and Epic Systems Corp. v. Lewis. These decisions held that courts may not disregard bilateral arbitration agreements or reshape traditional individualized arbitration by mandating class-wide arbitration procedures without all parties’ consent. Viking River argued the Supreme Court needed to review the case to reaffirm the FAA and national policy in favor of arbitration. Viking River further argued review was necessary to ensure that Concepcion and Epic promote bilateral arbitration, rather than simply result in “representational litigation” under PAGA by those who agreed to arbitrate individually. In granting review, the Supreme Court will decide “[w]hether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.”

This will be a closely watched decision for both sides of the bar and will likely have a groundbreaking effect on California employment litigation. Should the Supreme Court decide in Viking River’s favor, PAGA-only actions, which have become the preference of California plaintiffs’ attorneys in the face of arbitration agreements containing class action waiver provisions, will largely become a thing of the past for those employers who mandate individual arbitration for employees. Although it is by no means certain how the Supreme Court will decide this issue, employers should certainly be ready to revisit any arbitration agreements with California employees and consider what if any changes the ultimate ruling may warrant.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 356
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About this Author

Ashley M. Farrell Pickett Labor & Employment Lawyer Greenberg Traurig Law Firm
Shareholder

Ashley M. Farrell Pickett focuses her practice in the areas of labor and employment and general business law. She has deep experience in both state and federal courts, ranging from individual claims to nationwide class actions.

In her employment practice, Ashley represents employers with respect to a wide range of employment discrimination and retaliation claims, sexual harassment, leaves of absence, employee accommodations, personnel policies, wage and hour compliance, and employment agreements, along with other labor and employment issues. Ashley is also skilled in advising...

310-586-7708
Radha D.S. Kulkarni Employment Litigation Attorney Greenberg Traurig Los Angeles, CA
Associate

Radha D. S. Kulkarni focuses on defending employers in a broad range of single plaintiff and class action employment matters involving claims of wrongful termination, discrimination, harassment, and retaliation, as well as California wage and hour issues in state and federal court. Radha additionally counsels employers regarding employment policies and handbooks, disability accommodations, leaves of absence, sexual harassment, exemption and independent contractor misclassification, executive compensation, and employment contract disputes. She also represents clients in trade secret...

310-586-7724
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