August 9, 2022

Volume XII, Number 221

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August 08, 2022

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The U.S. Supreme Court Says PAGA Representative Action Waivers Are Enforceable After All

On June 15, 2022, in Viking River Cruises, Inc. v. Moriana, Case No. 20-1573,_ U.S. _ (2022), by an 8-1 majority, the U.S. States Supreme Court held that the Federal Arbitration Act (“FAA”) preempts the California Supreme Court’s central holding in Iskanian v. CLS Transportation Los AngelesLLC, 59 Cal. 4th 348 (2014), that actions brought under the California Labor Code Private Attorneys General Act of 2004 (“PAGA”) could not be divided into individual and representative claims through an agreement to arbitrate.  This landmark opinion means that, at least for now, arbitration agreements with waivers of the right to bring representative PAGA claims for violations suffered by other alleged “aggrieved employees” will be enforced—just like class action waivers.

As discussed here, in Iskanian, the California Supreme Court held that an arbitration agreement could not waive an employee’s right to bring a “representative” action under PAGA asserting claims based on violations of the Labor Code suffered by other employees because these actions are brought in the State’s shoes as a sort of qui tam action.  Employers repeatedly had attempted to obtain U.S. Supreme Court review of Iskanian, but the Court rejected multiple cert petitions until this term.

Justice Alito’s majority opinion echoed the familiar view that “[t]he FAA was enacted in response to judicial hostility to arbitration.”  The majority rejected plaintiff Angie Moriana’s argument that PAGA provides a substantive right to pursue representative PAGA actions to recover penalties for Labor Code violations suffered by the named plaintiff and other “aggrieved employees.”  However, the majority likewise rejected Viking River’s argument that the FAA and arbitration, in general, require totally bilateral proceedings between only one employee and the employer.  Instead, the Court took the view that arbitration is compatible with a form of “representative” proceeding in which one employee pursues PAGA claims in the shoes of the State (i.e., as its representative) for violations of the Labor Code suffered by that one employee plaintiff.

Significantly, the majority ultimately struck down Iskanian’s arbitration carve-out for PAGA claims by taking issue with what it described as PAGA’s “built-in mechanism of claim joinder,” by which named plaintiffs “use the Labor Code violations they personally suffered as the basis to join to the action any claims that could have been raised by the State in an enforcement proceeding.”  The majority held that this portion of Iskanian “unduly circumscribe[d] the freedom of parties to ‘determine the issues subject to arbitration’ and ‘the rules by which they will arbitrate[]’ … in a way that violates the fundamental principle that ‘arbitration is a matter of consent.’”

The majority held that PAGA provides “no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding” – i.e., arbitration.  Therefore, once an employee’s claim has been compelled to arbitration on an individual basis, any claims asserting violations of the Labor Code suffered by other employees can be dismissed.

Though employers have good reason to rejoice in this outcome, critics of the decision have already noted that Justice Sotomayor’s concurrence casts doubt on Viking River’s long-term impact.  Although she voted with the majority, her concurrence provided what ultimately amounts to a “How-To” guide for plaintiffs’ attorneys and lawmakers to circumvent the Court’s decision.  For example—although such a modification would turn the common conception of standing on its head—Justice Sotomayor suggested that California courts could interpret California law or, alternately, the Legislature could amend PAGA, to permit an employee to litigate representative PAGA claims on behalf of other employees, even after the employee lost individual standing once the employee plaintiff’s claims were compelled to arbitration.

Therefore, at least for now, California employers can rest easier knowing PAGA claims are no longer immune to arbitration and waiver agreements.  Moreover, employers should reexamine their arbitration agreements to ensure that the language is sufficiently broad to maximize on this development.

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, Number 175
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About this Author

Anthony J Oncidi, Employment Attorney, Proskauer Rose Law Firm
Partner

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office. Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection....

310-284-5690
Kate Gold Labor and Employment Lawyer Proskauer
Partner

Kate Gold is a partner in the Labor & Employment Law Department in the Los Angeles office.

Kate has over 25 years of experience representing clients in a range of industries, across all areas of employment law.  An experienced litigator, she has represented clients in all types of employment-related suits, including class and collective actions, discrimination, retaliation and harassment, non-compete and wage/hour matters.  In addition to litigating, she conducts high-level workplace investigations and routinely counsels clients on matters involving the full range of state and...

+1.310.284.5623
Phillipe Lebel labor & Employment Attorney Los Angeles Proskauer Law Firm
Associate

Philippe (Phil) A. Lebel represents employers in all aspects of employment litigation, including wage and hour, wrongful termination, discrimination, harassment, retaliation, whistleblower, trade secrets, and breach of contract litigation, in both the single-plaintiff and class-action context, at both the trial and appellate level, and before administrative agencies. Phil also represents employers in connection with labor law matters, such as labor arbitrations and proceedings before the National Labor Relations Board. Additionally, Phil counsels clients to ensure compliance with federal...

+1.310.284.4558
Associate

Dylan Tedford is an associate in our Labor and Employment Department. Dylan graduated from the University of Southern California Gould School of Law, where he was a member of the Hale Moot Court Honors Program and served in several student organizations. While at USC, he was a legal extern for Judge Gregg Zive in the U.S. Bankruptcy Court for the District of Nevada. Prior to law school, Dylan was a government affairs coordinator for a lobbying firm in Nevada.

310-557-4566
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