California Supreme Court Clarifies State Law on PAGA Claims

Business

by | Jul 27, 2023

The California Supreme Court ruled on July 17, 2023, in Adolph v. Uber that “non-individual” employment claims under California’s Private Attorneys General Act (PAGA) can remain in court, even where “individual” PAGA claims were ordered to arbitration. PAGA enables workers to sue on behalf of themselves, other workers, and the state for labor law violations. This ruling is a break from the U.S. Supreme Court’s holding in Viking River Cruises, Inc. v. Moriana 142 S. Ct. 1906, 596 US __, 213 L. Ed. 2d 179 (2022) that a worker’s individual PAGA claims could go to arbitration and the worker’s non-individual claims could be dismissed for lack of standing in court. Justice Sotomayor, writing in a concurrence in Viking, stressed that the issue of standing is a question for the state court to decide, and the California Supreme Court acknowledged that they were breaking from the ruling in Viking, with California Supreme Court Justice Goodwin Liu writing “We are not bound by the high court’s interpretation of California law.” In so ruling, the California Supreme Court held that arbitration agreements that prohibit employees from bringing a representative action on behalf of other employees (i.e., “non-individual” claims) violate California public policy.

The underlying facts are that Erik Adolph filed a class action and PAGA representative action lawsuit against Uber arising from his work as a delivery food driver for Uber Eats. Adolph had signed an arbitration agreement that contained a class action waiver and required Adolph to arbitrate any claims against Uber on an individual basis. The agreement also stated that Adolph would not “bring a representative action on behalf of others under [PAGA] in any court or arbitration.” Based on the agreement, Uber filed a motion to compel arbitration of Adolph’s claims and also to dismiss the class claims, which the trial court granted. Adolph then sought to pursue only his PAGA claims on behalf of himself and other aggrieved employees. Uber again moved to compel, claiming Adolph had to arbitrate the question of whether he was an aggrieved employee under PAGA. Based on existing California case law that did not permit the “splitting” of PAGA claims into individual and representative claims, the trial court denied the motion, which the court of appeal affirmed.

The Adolph Court held that even if an employee is required to arbitrate his or her individual PAGA claims, the employee retains statutory standing under Labor Code section 2699(c) to bring claims on behalf of other aggrieved employees as long as the employee was employed by the “alleged violator,” and had suffered one or more alleged Labor Code violations. The Court also rejected the argument that an individual settlement of the employee’s Labor Code claims deprives the employee of standing to represent other aggrieved employees. On this point, the Court found standing required only “the fact of a violation,” regardless of whether it had been remedied, and “post-violation events,” such as an individual settlement, were not to be used to “expire” claims. Uber argued that employees might be able to relitigate the issue of whether they are an “aggrieved employee” after arbitration concluded. On this issue, the Court held that the decision of the arbitrator is binding once it is confirmed and entered as a final judgment under Civil Code section 1287.4, and employees cannot relitigate whether they are aggrieved for standing purposes should an arbitrator determine the employee suffered no Labor Code violations. However, if the arbitrator finds the employee suffered one Labor Code violation, the employee has standing to litigate other alleged Labor Code violations on behalf of other employees.

Since the Viking ruling, several California appellate courts have issued published opinions on the standing issue, with all but one allowing the non-individual claims to remain in court. Many other PAGA cases have been on hold, pending the California Supreme Court ruling in Adolph. The State Supreme Court did not rule on whether court actions for non-individual claims must be stayed pending the arbitration of individual claims, though the justices acknowledged that a court “may” decide to order such a pause. The Adolph decision will have an immediate impact on other cases before the state high court.

Adolph wipes out any benefits that employers may have obtained from the Viking ruling. Employers will need to consider what they should do with their current arbitration agreements as a result.

TALG assists its clients with reviewing their current arbitration agreements and recommending necessary changes. We invite you to contact us to help with this as well.

Author

  • Kevin Meade

    Kevin has represented hundreds of clients in all areas of litigation, focusing on complex litigation matters, including construction defect, insurance coverage, business disputes, class actions, and environmental or bodily injury claims.