California Supreme Court Holds Employees Do Not Lose Standing To Pursue Representative, Non-Individual Private Attorneys General Act Claims Even After Individual PAGA Claims Are Compelled To Arbitration

• Published date: 21 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Court Procedure
• Law Firm: Arnold & Porter
• Author: Mr David Reis, Dipanwita Deb Amar, Matthew R. Diton and Katharine L. Waters

On July 17, 2023, the California Supreme Court issued its highly anticipated decision in Adolph v. Uber Technologies Inc., No. S274671, --- P.3d ---, 2023 WL 4553702 (July 17, 2023). Not surprisingly, the court disagreed with the United States Supreme Court's analysis of PAGA standing in Viking River Cruises Inc. v. Moriana¹ and held that "[w]here a plaintiff has brought a PAGA action comprising individual and non-individual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA." Id. at slip op. 2-3.² This employee-friendly decision should cause employers to reevaluate their expectations for litigating PAGA claims. In a nutshell, the California Supreme Court made clear that an employee's signature on an arbitration agreement, even with a class or representative action waiver, will not preclude an employee from pursuing a PAGA action in court seeking to recover penalties on behalf of others.

Viking River Cruises

In Viking River, the United States Supreme Court held that the Federal Arbitration Act (FAA) preempts California's Iskanian rule "insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate." 142 S. Ct. at 1911. In so holding, the Court settled the issue of whether an employee can be compelled to submit his "individual" PAGA claims to arbitration pursuant to a pre-dispute arbitration agreement, answering that question in the affirmative.³

The U.S. Supreme Court went on to opine that, under its interpretation of California law, an employee whose individual PAGA claim is compelled to arbitration lacks standing to pursue the non-individual PAGA claims in court and, therefore, those non-individual claims should be dismissed. Id. at 1925 ("When an employee's own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit.") (citing Kim v. Reins International California Inc., 9 Cal. 5th 73, 90 (2020)). Though, as Justice Sotomayor noted in her concurrence: "Of course, if this Court's understanding of state law is wrong [on the issue of standing], California courts, in an appropriate case, will have the last word." Id. at 1925 (Sotomayor, J., concurring).

The Adolph Decision

As Justice Sotomayor predicted, the California Supreme Court took up the Adolph case...