In the latest development in what seems like a never-ending battle between employers’ efforts to limit their employees’ potential legal claims to individual claims only and employees’ efforts to ensure that they can bring representative or class claims against their employers, the California Supreme Court has determined that employees continue to maintain standing to have representative (or group wide) Private Attorneys General Act (“PAGA”) claims heard in court even where the employee’s individual claims are subject to valid arbitration provisions.
Larger employers (or those more likely to be subject to class actions by employees) have long sought to curb employees’ ability to bring class action lawsuits (e.g., claims for failure to pay overtime, failure to provide meal and rest breaks) through the use of arbitration provisions with their employees which limit or eliminate the employee’s ability to raise such claims as class action lawsuits, thus requiring employees to bring these claims on an individual basis in arbitration rather than in court. While unpleasant to deal with on an individual basis, such claims are far less likely to cause financial ruin for an employer and can be dealt with one-by-one. Plaintiffs’ lawyers have sidestepped this strategy by asserting claims under PAGA in addition to individual claims in their lawsuits, as California courts have ruled fairly consistently that PAGA claims are not subject to arbitration even if an employee’s individual claims are required to go to arbitration on an individual basis. The United States Supreme Court made a 2022 ruling which seemed to indicate that a properly-worded arbitration agreement could eliminate this plaintiff-side strategy, stating in its Viking River Cruises v. Moriana decision that an employee’s individual PAGA claims could indeed be sent to arbitration along with other employment-based claims, and that once such individual PAGA claims were sent to arbitration the employee would have no standing to pursue representative PAGA claims in court.
However, the California Supreme Court determined in Adolph v. Uber Technologies, Inc. that the US Supreme Court’s second point- that an individual employee loses standing to assert representative PAGA claims in court where their individual PAGA claims are subject to valid arbitration provisions- was not binding in California and was not the law of the land for California employers. Rather, the Court ruled that employees do maintain standing to have their representative PAGA claims heard even if their individual claims are sent to arbitration. This puts California employers on precarious footing with respect to arbitration agreements with employees in general, and with respect to legal strategies available to avoid and settle employment claims asserted by their employers. In the cat-and-mouse game being played between employers and employees, the California Supreme Court seems to have closed a door on what was otherwise a promising strategy for employers backed by a US Supreme Court ruling. Please contact NavBat to address issues with employment contracts with employees, and to talk over strategies for avoiding or limiting exposure to representative actions by employees or ex-employees.