Restoring PAGA: California Courts Reinforce Common-Sense Worker Protections, Rejecting Employers’ Reliance on US Supreme Court Decision in Viking River

Restoring PAGA: California Courts Reinforce Common-Sense Worker Protections, Rejecting Employers’ Reliance on US Supreme Court Decision in Viking River

Workers and their advocates have been responding to a complicated decision by the United States Supreme Court last year that employers are invoking to seek to force employees to sacrifice their rights to enforce worker protections in court. Fortunately, California Courts of Appeals stepped in recently to clarify an issue of state law that was teed up by the U.S. Supreme Court, to the benefit of workers state-wide.

This is the latest development in a long-term campaign by big business and its allies in the conservative U.S. Supreme Court to force employees into arbitration using mandatory, pre-dispute arbitration agreements. Employers often force employees to sign pre-dispute, individual arbitration agreements as a condition of employment. The California Legislature attempted to ban this practice in a law known as AB-51, but the 9th Circuit Court of Appeals struck down the law last month in Chamber of Commerce v. Bonta. When faced with unlawful conduct in the workplace, arbitration agreements require employees to adjudicate disputes on an individual basis in arbitration rather than court, which disproportionately results in victories for employers. Over the past dozen-plus years, the U.S. Supreme Court has issued numerous decisions making it easier for employers to use mandatory arbitration agreements to stack the deck and avoid being held responsible for illegal employment practices.

Claims brought using one important California worker protection law could not be forced into arbitration, according to landmark 2014 California Supreme Court decision Iskanian v. CLS Transportation. This decision concerns the Labor Code Private Attorneys General Act, known as PAGA, which allows employees to enforce worker protections in the California Labor Code on behalf of themselves and other aggrieved employees. PAGA was passed in 2004 out of necessity born from corporate greed, when the State of California was reeling from the Enron scandal and the government lacked resources to enforce the Labor Code. To address the problem, the Legislature engaged the private sector Bar in Labor Code enforcement, providing a mechanism for employees to enforce the Labor Code on the State’s behalf. PAGA directs wrongdoing employers to pay wronged employees’ legal fees, without which most employees would lack the financial means to obtain legal services to exercise their rights, as well as steep penalties to deter wrongdoing. The first 75% of PAGA damages go to the State of California, with the remaining 25% going to aggrieved employees.

The anti-worker lobby has had its eyes on PAGA since it was enacted, including by qualifying a ballot measure for the 2024 election to have the law repealed, a blatant attempt by big business to excuse itself from the requirements of the Labor Code. Rather than ensuring compliance with worker protection laws, many employers have attempted to sidestep the Labor Code by forcing employees to sign arbitration agreements as a condition of employment. However,  the Iskanian decision held that PAGA claims cannot be forced into arbitration because PAGA plaintiffs stand in the shoes of the government, similar to what is known as a qui tam action, and the government cannot be compelled into arbitration against its volition.

Last June, the U.S. Supreme Court rejected one holding in Iskanian, that PAGA claims could not be divided between individual and representative claims, in  Viking River Cruises v. Moriana. The decision by Justice Samuel Alito distinguished between “non-individual” PAGA claims and “individual” PAGA claims, an inaccurate distinction, as noted by the California Court of Appeal in Gavriiloglou v. Prime Healthcare Management, Inc.: “[A]n ‘individual PAGA claim’ is not actually a PAGA claim at all. It would exist even if PAGA had never been enacted. It is…more accurately, an individual Labor Code claim.” ((2022) 83 Cal.App.5th 595, 605.)  From here, Viking River concluded that the Federal Arbitration Act preempts PAGA as to so-called “individual” PAGA claims, and therefore those claims can be forced into arbitration. Alito went on to misinterpret California law to conclude that an individual would lack standing to bring a non-individual claim without an individual claim, an error which, as noted in Justice Sonia Sotomayor’s concurrence, California courts were free to correct. Bryan Schwartz Law, P.C. anticipated that the California courts may provide the necessary clarity following the U.S. Supreme Court’s confounding decision.

Now, California appellate courts have been weighing in, issuing decisions in favor of employees’ rights to invoke PAGA without being forced into arbitration on an individual basis. The 5th District Court of Appeal concluded that the PAGA claims seeking to recover the civil penalties provided by PAGA for a Labor Code violation suffered by an employee other than the plaintiff could not be forced into arbitration, and a plaintiff asserting such claims have standing to bring them. On the other hand, PAGA claims seeking to recover civil penalties provided by PAGA for a Labor Code violation suffered by the plaintiff may be forced into arbitration. That case is Galarasa v. Dolgen California, LLC. The court further clarified that blanket waivers of PAGA claims are still invalid under Viking River and Iskanian.

The 4th District Court of Appeal delved deep into the legislative history of PAGA in its decision in Wood v. Kaiser Foundation Hospitals, interpreting PAGA to confer no substantive rights on employees, instead merely providing a procedural mechanism to act as the government’s agent to collect penalties for Labor Code violations. Therefore, PAGA may apply even when an employee would otherwise lack standing. The Wood decision follows close behind the same court’s opinion in Piplack v. In-N-Out Burgers, which likewise held that a plaintiff does not lose standing to pursue a PAGA claim on behalf of other aggrieved employees even if the plaintiff’s individual claim is forced into arbitration, confirming that the standing requirements under PAGA are only that the plaintiff: (1) was employed by the alleged violator, and (2) against whom one or more of the alleged violations was committed. Having an individual PAGA claim is not required.

Hopefully we will continue to see such decisions reaffirming employees’ right to utilize PAGA without being forced into employer-friendly arbitration on an individual basis when they are acting as the State’s representatives.

If you believe your employer has violated your workplace rights, contact Bryan Schwartz Law, P.C..