In the long-awaited Adolph v. Uber Technologies case, the California Supreme Court unanimously held that an order requiring an employee to arbitrate his individual Private Attorneys General Act of 2004 (“PAGA”) claim does not deprive the employee of standing to litigate non-individual PAGA claims on behalf of other employees.
The Court’s Decision:
The question before the California Supreme Court was whether an aggrieved employee who has been compelled to arbitrate his individual PAGA claims maintained standing to pursue his non-individual PAGA claims arising out of events involving other employees in court or in any other forum. Justice Liu wrote for the Court, “[W]here a plaintiff has filed a PAGA action comprised of individual and non-individual claims, an order compelling arbitration of individual claims does not strip the plaintiff of standing to litigate non-individual claims in court.”
This holding was contrary to the U.S. Supreme Court’s ruling in June 2022 in another California case, Viking River Cruises v. Moriana, in which the court held: (1) that an employee’s individual PAGA claims can be compelled to arbitration where the Federal Arbitration Act (“FAA”) applies to the arbitration agreement; and (2) that once the employee’s individual PAGA claim is compelled to arbitration, the employee loses standing to maintain PAGA claims on behalf of other employees, resulting in dismissal of the representative PAGA claims.
The California Supreme Court acknowledged that the U.S. Supreme Court adopted a different interpretation of state law in Viking River but held that it was “not bound by the high court’s interpretation of California law.” The California Supreme Court declined to defer to the U.S. Supreme Court’s interpretation of state law because the case did not involve a “parallel federal constitutional provision or statutory scheme.”
What Employers Need to Know:
Under Adolph employers will likely still have to face the prospect of non-individual PAGA lawsuits, even if individual PAGA claims are sent to arbitration. The Court in Adolph suggested that it is appropriate to stay any non-individual PAGA claim in state court pending the outcome of the arbitration of the individual PAGA claim. Such a stay would avoid the need to litigate parallel, overlapping cases.
In addition, the California Supreme Court suggested that, if an arbitrator determines a PAGA plaintiff is not an aggrieved employee and the trial court confirms the ruling, the plaintiff will lose standing to prosecute the non-individual PAGA claims of the other allegedly aggrieved employees in court.
Despite the Adolph decision, we recommend all California employers consider implementing an arbitration agreement if they do not currently have one in place. California employers that already have arbitration agreements in place should review the policy with employment counsel to ensure that it provides protection against PAGA claims and class actions, to the maximum extent possible under current law. In the meantime, it is important for employers to ensure that they are strictly complying with wage and hour laws because if an employee is unable to prove he suffered an individual labor code violation, he will be unable to proceed with a representative PAGA claim.
Contact Hill Farrer for Further Information
Please contact your Hill Farrer attorney or any member of our Labor and Employment department at (213) 620-0460 with any questions about this case, PAGA, or arbitration agreements.