I.IntroductionPrior to 2022, actions under the California Private Attorneys General Act (PAGA),Cal. Lab. Code, §§ 2698, et seq., emerged as one of the most popular and mosteffective workarounds to workplace arbitration programs.The PAGA created a scheme to “deputize” private citizens - “aggrieved employees”- to sue their employers for violations of the California Labor Code on behalf oftheir co- workers as well as the State. If successful, aggrieved employees receive25% of any recovered civil penalties and pass the other 75% to the CaliforniaLabor and Workforce Development Agency (LWDA). The PAGA authorizes theattorneys who pursue the action to collect their attorney’s fees and costs inaddition to the civil penalties.In 2014, the California Supreme Court ruled in Iskanian v. CLS Transportation LosAngeles that the Federal Arbitration Act (FAA) does not preclude the CaliforniaLegislature from deputizing employees to prosecute violations of the CaliforniaLabor Code on behalf of the state and, therefore, does not preempt a state lawthat prohibits waiver of PAGA representative actions. This ruling led to anexplosion of PAGA notices in 2014, which generally grew year over year until2022.In 2022, PAGA actions saw their first setback as a workaround to arbitration. InJune 2022, the U.S. Supreme Court held in Viking River Cruises that the FAApreempts California law to the extent that such law would preclude an arbitrationagreement from dividing a PAGA action into its individual and non-individualcomponents. The U.S. Supreme Court ruled that an employer could compel anemployee to arbitrate the employee’s individual PAGA claim and that, as a result,the representative PAGA claim on behalf of other employees should be dismissed.The U.S. Supreme Court reasoned that, having been compelled to arbitrate his orher individual claim, the plaintiff no longer had standing to maintain arepresentative PAGA action in court.This was obviously a favorable ruling for employers, but Justice Sotomayor’sconcurrence complicated matters. It noted that, if the Supreme Court’s analysis of statelaw was wrong regarding a plaintiff’s lack of standing to maintain a representative PAGAaction if the individual PAGA action was compelled to arbitration, then California courtswould have the last word.Taking Justice Sotomayor’s cue, the Supreme Court of California decided to addressthis issue in Adolph v. Uber Technologies a month later in July 2022. Adolph is set todecide what happens to the representative PAGA claim when the individual PAGA claimhas been sent to arbitration. Since Viking River and pending Adolph, California statecourts have been grappling with how to handle such representative claims, with moststate courts staying, rather than dismissing, the representative PAGA claims. Mostexperts anticipate a ruling in Adolph by late summer 2023.9© Duane Morris LLP 2023PAGA Litigation Review – 2023
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