Supreme Court Holds That PAGA Representative Waivers Are Enforceable In Certain Significant Respects

• Published date: 17 June 2022
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Employee Benefits & Compensation, Employment Litigation/ Tribunals, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Law Firm: Sheppard Mullin Richter & Hampton
• Author: Mr John Ellis

On June 15, 2022, the United States Supreme Court issued its much anticipated decision in Viking River Cruises, Inc. v. Moriana. The Supreme Court held that California's rule invalidating pre-dispute agreements waiving the right to bring "representative" claims under the Private Attorneys General Act of 2004 (PAGA) is partially preempted by the Federal Arbitration Act (FAA). The decision raises some difficult questions that will need to be resolved in future litigation, but it should provide employers with a powerful tool to limit PAGA claims.

PAGA and the Concepcion and Iskanian Decisions

To understand the Court's holding in Viking River Cruises, some background and history is necessary.

PAGA is a California statute that permits an "aggrieved employee" to sue his or her employer to collect civil penalties on behalf of the state for violations of the California Labor Code for which there would ordinarily be no private right of action. Cal. Lab. Code ' 2698, et seq. For most alleged Labor Code violations, PAGA imposes a civil penalty in the amount of $100 per employee, per pay period in which the violations occur. Cal. Lab. Code ' 2698(f)(2). Of the penalties recovered in a PAGA action, 25% are awarded to the employees against whom the violations were committed, and 75% are awarded to the California Labor Workforce and Development Agency. Cal. Lab. Code ' 2699(i). California courts have interpreted PAGA to permit a single employee who has suffered any one alleged Labor Code violation to claim penalties for any and all violations that may have been committed against other employees even if they did not personally experience them. Huff v. Securitas Sec. Servs. USA, Inc., 23 Cal. App. 5th 745 (2018).

In 2011, the United States Supreme Court held that the FAA preempts state law rules invalidating class action waivers in arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). Concepcion involved a consumer class action and held that due to class actions' procedural complexity, inclusion of absent-party claims, and high stakes, "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA." Id. at 344. Therefore, courts are required to compel individual, bilateral arbitration of any claims covered by an arbitration agreement, unless the parties expressly agree to class or collective proceedings. See Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407...