California: Non-Individual PAGA Claims May be Independently Prosecuted

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All Employers with Employees in CA

EFFECTIVE

July 17, 2023

  

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Quick Look

  • Non-individual PAGA claims may still be litigated in court, even if the individual portion of the claim has been ordered to arbitration.
  • An unsuccessful individual PAGA claim may lead to dismissal of a non-individual PAGA claim for lack of standing as an aggrieved employee.

Discussion

In 2022, in Viking River Cruises, Inc. v. Moriana, the U.S. Supreme Court said that an arbitration agreement subject to the Federal Arbitration Act (FAA) may separate Private Attorneys General Act (PAGA) actions into (1) individual PAGA claims resolved via arbitration and (2) nonindividual PAGA claims resolved in court. According to the Court, PAGA itself does not allow a representative claim to survive in court without the individual portion of the claim, thereby causing the representative claim to be dismissed. However, in Adolph v. Uber Technologies, the California Supreme Court recently changed this understanding, stating that employees’ non-individual PAGA claims can still be litigated, even when their individual claims are ordered to arbitration.

In disagreeing with Viking River Cruises, the California Supreme Court said an employee compelled to arbitrate their individual PAGA claims still retains standing to litigate the non-individual PAGA claims in court. However, a court may stay the non-individual PAGA claims while the individual PAGA claims are arbitrated. The Court even indicated that a determination by the arbitrator that the individual is not an “aggrieved employee” could cause a court to dismiss the non-individual claims because the individual would not be a qualified representative of the alleged employer violations. Although somewhat of a silver lining, this case highlights the importance of employer vigilance over wage and hour compliance. If individual claims are successful in arbitration, employers will still have to face non-individual claims in court.

While this ruling is another jolt in the ongoing PAGA battle, this is not the end of PAGA’s story. In November 2024, voters will determine whether to enact the “California Fair Pay and Employer Accountability Act of 2024,” which would eliminate PAGA in favor of increased state enforcement of wage and hour laws by the Department of Labor Standards Enforcement (DLSE). In the meantime, employers should have their arbitration agreements reviewed by legal counsel for compliance.

Action Items

  1. Have arbitration agreements reviewed by legal counsel.
  2. Review wage and hour practices for compliance.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase