On July 17, 2023, the California Supreme Court (“CSC”) unanimously ruled in Adolph v. Uber Technologies, Inc. (“Adolph”) that an employee who brings an action under California’s Private Attorneys General Act (“PAGA”) with both individual and non-individual claims does not lose standing to litigate the non-individual claims in court “simply because the individual claims have been ordered to arbitration.” (See https://www.courts.ca.gov/opinions/documents/S274671.PDF.) The central issue the CSC was asked to decide was “whether an aggrieved employee who has been compelled to arbitrate claims under PAGA that are ‘premised on Labor Code violations actually sustained by’ the plaintiff maintains statutory standing to pursue PAGA claims arising out of events involving other employees.” Through its decision in Adolph, the CSC has resoundingly signaled that it will continue to remain the final arbiter of how to interpret and enforce matters regarding state law, such as PAGA.
The decision in Adolph authoritatively differs from the United States Supreme Court’s (“SCOTUS”) decision in Viking River v. Moriana (“Viking River”). (See https://www.supremecourt.gov/opinions/21pdf/20-1573_8p6h.pdf.) In Viking River, the SCOTUS determined that the Federal Arbitration Act requires enforcement of an agreement to arbitrate a PAGA plaintiff’s claim for civil penalties to the extent the claim is based on alleged violations the plaintiff personally experienced (i.e., arbitration of “individual PAGA claims”). While the CSC upheld the California rule prohibiting the required waiver or arbitration of a PAGA plaintiff’s claim for civil penalties based on alleged violations experienced by others (i.e., the “representative PAGA claim”), the Viking River decision also concluded that the representative PAGA claim must be dismissed once the individual claim is compelled to arbitration. The SCOTUS found that a PAGA plaintiff lacks Article III standing to maintain a representative PAGA claim after their individual PAGA claim was sent to arbitration. (Justice Sotomayor, in a concurring opinion, mentioned that the issue of non-individual standing under PAGA may be one for California Courts to decide.) In Adolph, the CSC rejected that conclusion.
Unfortunately, we reasonably expect future PAGA plaintiffs to seize on the Adolph decision to support arguments in an attempt to further diminish PAGA’s standing requirement and allow for the proliferation of PAGA litigation in the years to come. While the ruling in Adolph will no doubt cause more complications for employers, the decision nonetheless has provided clearer steps employers must take to mitigate against costly PAGA actions. Such steps include:
- Reviewing and revising arbitration agreements to ensure they are in accordance with the principles set forth in Viking River and Adolph.
- Enforcing and compelling arbitration of individual PAGA claims under arbitration agreements because a PAGA plaintiff can potentially lose standing to pursue his or her non-individual claim in court if the arbitrator finds that he or she did not suffer any wage and hour violation.
- Ensuring that policies regarding wage and hour compliance are strictly imposed and followed to avoid potentially costly litigation.
We will continue to monitor developments in this area. In the meantime, if you have questions about PAGA litigation and arbitration agreements, please contact any attorney in Kahana Feld’s Labor & Employment Litigation practice group.