Earlier this week, the California Supreme Court issued its much-anticipated decision in Adolph v. Uber Technologies, Inc. In a victory for plaintiffs, the Court held that a plaintiff whose individual Private Attorneys General Act (“PAGA”) claims are compelled to arbitration still has standing to pursue representative PAGA claims in court.
The fight to send PAGA claims to arbitration has a long history – too long for this summary – but the procedural history of Adolph and the intervening U.S. Supreme Court decision in Viking River Cruises is worth noting here.
In Adolph, the plaintiff, Erik Adolph, signed an arbitration agreement containing a PAGA waiver, which provided that Adolph would not “bring a representative action on behalf of others under [PAGA] in any court or in arbitration.” After Adolph filed a class action complaint alleging wage and hour claims stemming from his alleged misclassification as an independent contractor, Defendant Uber Technologies, Inc. successfully moved to compel arbitration. Adolph then filed an amended complaint alleging only PAGA claims. Uber filed another motion to compel arbitration on the grounds that Adolph was required to pursue his individual PAGA claims in arbitration. The trial court denied Uber’s motion and, in April 2022, the appellate court upheld that decision on the grounds that PAGA claims were not subject to arbitration and could not be waived under California law.
Just two months later, in June 2022, the U.S. Supreme Court held in Viking River Cruises, Inc. v. Moriana, that, under the Federal Arbitration Act, PAGA claims can be divided into individual claims and representative claims (contrary to what California courts had ruled in the past). Therefore, under a valid arbitration agreement, SCOTUS held a plaintiff’s individual PAGA claims can be compelled to arbitration and, if that happens, a plaintiff would then lack statutory standing to pursue representative claims in court. In a concurring opinion, Justice Sotomayor predicted that California courts would “have the last word” on the standing issue.
One month later, in Adolph, the California Supreme Court took up the issue of whether a plaintiff who has been compelled to arbitrate their individual claims under PAGA maintains statutory standing to pursue representative PAGA claims in court. On July 17, the Court answered in the affirmative: “where 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.” The Court reiterated that there are only two requirements for PAGA standing: the plaintiff must have (1) been employed by the alleged violator, and (2) suffered from one or more Labor Code violations.
Interestingly, the Court suggested that trial courts should stay representative PAGA claims while the individual PAGA claim is being arbitrated. If the arbitrator determines that the named plaintiff is not an aggrieved employee, the named plaintiff will lack standing to pursue any representative PAGA claims in court. But if the arbitrator finds a single Labor Code violation, the decision will cement the named plaintiff’s standing to pursue the representative claims.
What Does it Mean for Employees and Employers?
The most significant takeaway for litigants on both sides of the “v” is that employers cannot use arbitration agreements to avoid representative PAGA actions. But Adolph does not remove every tool from the employer’s toolkit. An employer who believes a plaintiff’s PAGA claim lacks merit can avoid broad PAGA discovery by defeating the individual claim in arbitration. This strategy is not without risk, however. If the employee can prove a single Labor Code violation, the employer will still face the representative action in court in addition to the expense of defending the individual claim in arbitration. Employers should think carefully about the merits of a plaintiff’s allegations before moving to compel a PAGA claim to arbitration.