A Hopeful Path Exists in the Wake of Viking River Cruises for Representative PAGA Actions

A Hopeful Path Exists in the Wake of Viking River Cruises for Representative PAGA Actions

The Private Attorneys General Act of 2004 (PAGA) allows for employees to bring individual and representative claims in court to assert California Labor Code violations against their employers. The United States Supreme Court in Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906 decided that California employers may force workers with valid arbitration agreements to arbitrate PAGA claims, reversing the California Supreme Court’s 2014 decision in Iskanian v. CLS Transportation Los Angeles, LLC, which Bryan Schwartz Law, P.C. has written about before. However, this does not have to be the end of the road for PAGA representative actions.

In Iskanian, the California Supreme Court held that because a PAGA action is brought in the shoes of the State, and the State did not agree to arbitration, representative PAGA actions could not be compelled to arbitration. California courts also held that representative PAGA claims could not be split from the workers’ individual PAGA claims, refusing to enforce arbitration agreements as to PAGA claims.

In Viking River, plaintiff Angie Moriana signed an arbitration agreement at the start of her employment with Viking River Cruises that required Moriana to arbitrate employment claims and waived her right to bring claims against the company on a class, collective, or representative basis – the latter pertaining to PAGA. The arbitration agreement waived Moriana’s right to bring a representative PAGA action altogether. Additionally, her arbitration agreement also included a severability clause which stated that if any portion of the arbitration agreement was found invalid it would be litigated in court, but that any claims pertaining to a valid section would go to arbitration.

The United States Supreme Court found that not enforcing valid arbitration agreements with respect to individual claims violates the Federal Arbitration Act (FAA). Although employers are taking the decision as a victory, Viking River need not mark the end of PAGA enforcement. Viking River Cruises rejected the argument that arbitration agreements can prohibit representative actions and held, for the first time, that arbitration agreements cannot strip individuals of state law substantive rights. The United States Supreme Court agreed with part of the California Supreme Court’s rule in Iskanian, finding that wholesale waivers of PAGA claims are invalid. Employers cannot foreclose representative PAGA actions in their arbitration agreements. Employees may bring PAGA representative actions in court, or, if an employee has an arbitration agreement that subjects representative PAGA actions entirely to arbitration, then the employee may bring such an action in arbitration, which can result in very high costs to an employer as employers generally pay for arbitration fees.

Additionally, the Viking River arbitration agreement had a severability clause. If an employee has an arbitration agreement that bars representative actions and sends individual actions to arbitration without a severability clause, the individual arbitration agreement could potentially also be invalid since arbitration agreements that outright bar representative actions are not valid. The severability clause was the section that saved and required the individual arbitration in Viking River. Absent a severability clause, if an arbitration agreement has an invalid bar of representative actions, an employee could potentially continue both their individual and representative PAGA claims in court.

The Supreme Court further found, seeking to apply California law concerning standing, that Moriana would lose standing to continue with a representative PAGA action, since her individual claims had to go to arbitration, and representative claims were precluded in arbitration. As Supreme Court Justice Sotomayor explains in her concurrence, if California courts find that the Supreme Court did not understand the California PAGA standing issue correctly, then California courts can correct the issue, and they have the final say applying California law. Whether or not a party has standing to bring suit under California law is defined in California’s statutes, as interpreted by California courts.

Clarity as to California law on standing may be coming soon. The California Supreme Court has recently agreed to hear Adolph v. Uber Technologies, which asks whether an aggrieved employee who has been compelled to arbitrate claims under PAGA that are premised on Labor Code violations maintains California statutory standing to pursue a representative PAGA claim. The Court may allow representative PAGA actions to continue even with an individual PAGA claim in arbitration. This would allow for an employee to assert claims as to all the violations of the Labor Code that an employer has committed and require a law-violating employer to correct its working conditions and practices. This would also fall in line with other California Supreme Court precedents, pre­-Viking River. In Kim v. Reins International California, Inc., about which Bryan Schwartz Law, P.C. has written previously, the California high court found that an employee who settles or dismisses an individual claim does not lose standing to pursue a claim under PAGA. The Court explained that PAGA’s text only requires that an employee have suffered one or more Labor Code violations. PAGA does not require the plaintiff in a PAGA representative action have suffered each violation personally, as the Court of Appeal held in Huff v. Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745.

The California Supreme Court has the power to correct the standing issue for representative PAGA claims that the United States Supreme Court got wrong and allow employees to continue to vindicate their rights in court, even with an arbitration agreement sending individual claims to arbitration. Justice Sotomayor also suggested that the California legislature could address the standing issue by amending the PAGA statute, if clarity is needed on standing to clarify that representative PAGA actions may continue even if the plaintiff’s individual PAGA claims have been sent to arbitration. Action by either the California courts or the California legislature to clarify standing in representative PAGA actions could allow representative PAGA actions to continue to be an important tool for Labor Code enforcement, despite valid arbitration agreements for individual claims.

If you are an employee and have questions about an arbitration agreement between you and your employer, contact Bryan Schwartz Law, P.C.