04 Apr PAGA UPDATE AFTER VIKING RIVER
Last June the U.S. Supreme Court issued its decision in Viking River Cruises v. Moriana, holding that employees covered by an arbitration agreement can be required to submit their individual PAGA claims to binding arbitration. In so holding, SCOTUS ruled the so-called Iskanian rule that was first adopted by the California Supreme Court in 2014, and which prohibited arbitration of PAGA actions and splitting PAGA claims between individual and representative claims, was preempted by the Federal Arbitration Act.
One of the more controversial aspects of the Viking River decision is Justice Alito’s opinion that an employee whose individual PAGA claim was subject to arbitration loses standing to bring a representative claim. In a separate opinion by Justice Sotomayor, it was noted that PAGA standing is a matter of state law, and that the California courts or Legislature will have the last word on standing to bring a representative claim after an employee’s individual claim is compelled to arbitration. The California Supreme Court has since granted review in Adolph v. Uber Technologies that should be decided late this year.
In the meantime, there have been a slew of court cases weighing in on the standing issue. In the trial courts, most state court judges have refused requests by defendants to dismiss representative PAGA claims after compelling arbitration of the plaintiff’s individual claim based on Viking River. Instead, most state court judges have either refused to follow the Viking River standing ruling as an incorrect interpretation of state law, or deferred ruling on the issue until the California Supreme Court decides the Adolph case. In federal court, district court judges have been more willing to follow the Viking River standing ruling and dismiss the representative PAGA claim after compelling arbitration of the plaintiff’s individual claim based on a lack of standing. However, even in federal court some judges have taken a wait and see approach until Adolph is decided.
In just the past few months, there have been four published California Court of Appeal decisions that have held Viking River is wrong on standing as a matter of state law, and have refused to dismiss representative PAGA claims: Galarsa v. Dolgen California, Piplack v. In-N-Out Burgers, Gregg v. Uber Technologies, and most recently Seifu v. Lyft, Inc. All four cases relied on the California Supreme Court’s 2020 decision in Kim v. Reins International California, that an employee has standing to bring a representative PAGA claim so long as they suffered at least one Labor Code violation, even after they entered into a settlement of their individual claims. Although Kim was not an arbitration case, its broad holding on PAGA standing was determined to be binding on the issue of PAGA standing in the arbitration context in all four of these cases.
The California Supreme Court will have the final say on PAGA standing in the Adolph case. Depending on the outcome of Adolph and the Court’s reasoning, there could be further challenges based on FAA preemption if the Court refuses to follow Viking River. As a result of this uncertainty, it is expected that the volume of PAGA filings will not slow down any time soon. However, this uncertainty can also help promote settlement of PAGA cases, as neither side wants to risk an unfavorable outcome in the courts that may take years to finally resolve.
