California Supreme Court: Workers Compelled to Arbitration May Still Pursue PAGA Claims in Court

Client Alert

In a highly anticipated ruling, the California Supreme Court has held that employees may still have standing to sue for Labor Code violations in a representative capacity, even when their individual claims have been compelled to arbitration.

The unanimous opinion in Adolph v. Uber Technologies, Inc., S274671 (July 17, 2023), authored by Justice Goodwin Liu, considered a case brought by Uber driver Erik Adolph for civil penalties under California’s Private Attorneys General Act (PAGA) against the ride-share company. In response to the suit, Uber argued that Adolph lacked the requisite standing to maintain a representative PAGA action after he had already been compelled to arbitrate his claims in an individual capacity, based on an arbitration agreement he signed when he began driving for the company. This argument was consistent with last year’s ruling by the U.S. Supreme Court in Viking River Cruises, Inc. v. Moriana, 20-1573 (June 15, 2022). There, the high court concluded that a PAGA plaintiff loses standing in this situation: “[A]s we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.”

The California high court, however, disagreed.

As explained by Justice Liu, “PAGA standing is not inextricably linked to the plaintiff’s own injury. Employees who were subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation.” Thus, for purposes of standing, “the statute does not require a PAGA plaintiff who has alleged one or more personally sustained violations to seek civil penalties for those violations in the same forum as the litigation of non-individual claims.” The Court held “it is plaintiff’s status as an aggrieved employee, not the redressability of any injury the plaintiff may have suffered, that determines the availability of PAGA standing.”

Given the tenor of the oral argument on this matter, the ruling may not come as a surprise. Nevertheless, the ruling does provide some strategic guidance for employers that find themselves in a similar situation. Specifically, the ruling provides that where an employee’s individual PAGA claims are compelled to arbitration, and where an arbitrator determines the employee either is or is not an aggrieved employee, that determination “would be binding on the court.”

Why It Matters

The California Supreme Court’s decision in this case allows representative claims to go forward even when individual claims are compelled to arbitration, but sensibly retains a key prerequisite for an employee to be a PAGA representative: the employee must be aggrieved. In other words, if the arbitrator determines an employee is not an “aggrieved employee” and the court confirms that determination and reduces it to a final judgment, the court must then give effect to that finding and the employee could no longer prosecute non-individual representative claims due to lack of standing. In addition, Uber’s lawyers have already indicated that they are considering their appellate options in light of this opinion, which they argue is inconsistent with the U.S. Supreme Court’s decision in Viking River, so this decision may yet not be the final say on the issue. Manatt filed an amicus brief in support of Uber in this case and will be following future appellate developments closely.

See Manatt’s prior discussions of Viking River here.

 

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