California Supreme Court Restores Hope of Labor Code Enforcement, in Adolph v. Uber

California Supreme Court Restores Hope of Labor Code Enforcement, in Adolph v. Uber

This week, the Supreme Court of California restored employees’ right to bring claims of Labor Code violations against their employer on behalf of the State under the Private Attorneys General Act of 2004 (PAGA), even when they have signed an arbitration agreement.  This is a significant win for workers’ rights, as an avenue for enforcement of the Labor Code following the Supreme Court’s decision in Viking River Cruises v. Moriana.  Bryan Schwartz Law has blogged about Viking River here, and about other PAGA- and arbitration-related Supreme Court decisions many times, including here, here, and here.

PAGA authorizes individual plaintiffs to bring actions alleging violations of the Labor Code on behalf of the State of California.  Due to the increasing prevalence of mandatory arbitration clauses in many employment agreements, designed to prevent concerted actions among employees and keep allegations of employer’s Labor Code violations out of court, PAGA is often the only remaining avenue to seek broad remedies for employer’s Labor Code violations through the courts.

The Uber decision allows Plaintiffs to maintain standing to litigate claims on behalf of other employees under PAGA, despite an order compelling arbitration of Plaintiff’s individual claims.

In Viking River, the Supreme Court interpreted California law to find that a Plaintiff who signed an arbitration agreement compelling arbitration for individual claims lost standing under PAGA to bring both individual and representative claims on behalf of other employees to court. The Court reasoned that the Federal Arbitration Act compels enforcement of valid arbitration agreements for individual claims.  Further, it held that the FAA preempts California jurisprudence that PAGA actions cannot be divided into individual and non-individual claims, so that it was impermissible to bar arbitration agreements covering individual claims where representative PAGA actions cannot be compelled to arbitration.  In her concurrence, Sotomayor remarks that California courts have the last word on the interpretation of PAGA if they find that the Supreme Court interpreted state law regarding standing to bring PAGA claims incorrectly.

The Supreme Court of California granted review to examine the issue of standing under PAGA when employees signed an arbitration agreement compelling arbitration of individual claims.  The Supreme Court concluded that under the statute, “a plaintiff who files a PAGA action with 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.”

The plaintiff, Erik Adolph, worked for Uber delivering food through Uber Eats.  Adolph signed an employment agreement with Uber that contained an arbitration provision, which requires him to arbitrate all work-related claims he has against Uber. The agreement also contained a provision stating that he could not bring a representative action on behalf of others under PAGA in court or in arbitration.

Adolph sued Uber in Superior Court in October 2019, bringing individual and class claims for misclassification as an Independent Contractor and failure to reimburse for necessary business expenses.  The trial court granted Uber’s motion to compel arbitration of Adolph’s individual claims, and dismissed Plaintiff’s class action claims.  As such, Adolph amended his complaint to bring only a PAGA claim.  Again, Uber filed a motion to compel arbitration.  The trial court and the Court of Appeal, citing Iskanian v. CLS Transp. (2014) 59 Cal.4th 348, ruled that PAGA claims are not subject to arbitration and that an agreement waiving the right to bring a PAGA claim on behalf of other employees violates public policy.  After the Supreme Court decided Viking River, Uber argued that based upon Adolph’s arbitration agreement he lost standing to pursue PAGA claims.

The Supreme Court of California rejected Uber’s arguments, stating that PAGA contains only two requirements for a Plaintiff to have standing as an “aggrieved employee”: (1) the Plaintiff must be someone who was employed by the alleged violator; and (2) is someone against whom one or more of the alleged violations was committed.  As such, the Court held that when a Plaintiff brings a PAGA action containing both individual and non-individual claims, an order compelling arbitration of Plaintiff’s individual claims does not strip the Plaintiff of standing as an “aggrieved employee” to bring claims to court on behalf of other employees under PAGA. In short- Adolph suffered alleged Labor Code violations at Uber, so whether he had to arbitrate the violations against him, or even settled his own personal claims (as in Kim v. Reins (2020) 9 Cal.5th 73), courts are not free to add to the legislatively-enacted statutory standing requirements.

In making this decision, the California Supreme Court relied on two main sources: the statutory text and the intent of the legislature in enacting PAGA. The Court maintained that the plain language of the PAGA statute compels the holding, and further, that the legislative intent behind the statute aligns with this interpretation.

First, the Court emphasizes the history and intent of the legislature in enacting PAGA.  PAGA was enacted by California’s legislature in order to address a lack of enforcement of the Labor Code, due to a shortage of government resources. PAGA authorizes an aggrieved employee to bring a civil action on behalf of themselves and other employees to enforce and recover civil penalties for Labor Code violations committed by employers. Under PAGA, plaintiffs are deputized to act as a proxy of the overburdened Labor and Workforce Development Agency to expand effective Labor Code enforcement.

With this history and legislative intent in mind, the Court analyzed the plain language of the statute.  Section 2699 of the statute provides that a PAGA action can be brought by “an aggrieved employee on behalf of himself or herself and other current or former employees.”  An aggrieved employee is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”  The Court declined to read any additional requirements for standing into the statute, as the broad standing requirements provided by the legislature and intent to augment the enforcement abilities of the Labor Commissioner make clear that PAGA provides broad standing requirements.

The Court ruled that here, Adolph was employed by Uber at the time when one or more alleged Labor Code violations were committed against him.  This is sufficient to find standing under PAGA.  The arbitration agreement compelling him to arbitrate his individual claims does not change his standing under PAGA for his non-individual claims. PAGA standing does not limit Plaintiff to bringing claims only of his own injury; employees who were subjected to at least one Labor Code violation at work have standing to serve as PAGA representatives for other employees who experienced other alleged violations.  This furthers the legislature’s goal of deputizing employees to bring claims of Labor Code violations at work to address the state enforcement agency’s resource and funding deficiencies.

In finding that Adolph does have standing under PAGA to bring non-individual, representative claims, the Court dismissed Uber’s arguments regarding procedural concerns about having arbitration and court proceedings happening alongside each other.  Further, the Court makes clear that there are only two requirements to be an “aggrieved employee” with standing under PAGA, and rejects Uber’s attempts to interpret additional standing requirements that are not in the statute.

This decision is a big win for plaintiffs’ and workers’ rights in general, as we have seen the rise of arbitration agreements whittle away at workplace protections while employers insulate themselves from responsibility.  More employees will be able to bring Labor Code claims on behalf of the State, seeking to vindicate the rights of their coworkers, as long as they meet the two requirements outlined by the Court in Adolph v. Uber.

If you are an employee and have questions about an arbitration agreement between you and your employer or are interested in bringing a PAGA claim please contact Bryan Schwartz Law, P.C..