Private Attorneys General Act Review – 2023 - Report - Page 15
FAA’s coverage.” Id. at 1919, n.4. Turning to the FAA preemption question, the
Supreme Court began by explaining the “two distinct ways” in which the term
“representative” is used in PAGA actions. Id. at 1916. “In the first sense, PAGA actions
are ‘representative’ in that they are brought by employees acting as representatives that is, as agents or proxies - of the State,” and in that sense “‘every PAGA action is . . .
representative.’” Id.
In the second sense, PAGA actions are “‘representative’ when they are predicated on
code violations sustained by other employees.” Id. at 1916. When the term is “used in
the second way,” the Supreme Court explained, “it makes sense to distinguish
‘individual’ PAGA claims, which are premised on Labor Code violations actually
sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA
claims arising out of events involving other employees.” Id.
Iskanian, the Supreme Court noted, prohibited waivers of “representative” PAGA claims
in both senses of the word: (a) “it prevent[ed] parties from waiving representative
standing to bring PAGA claims in a judicial or arbitral forum”; and (b) it “invalidate[d]
agreements to separately arbitrate or litigate ‘individual PAGA claims for Labor Code
violations that an employee suffered.’” Id. at 1916-17 (quoting Iskanian, 59 Cal.4th at
383).
The Supreme Court suggested that the first rule – prohibiting wholesale waivers of
PAGA actions in any forum – may survive FAA preemption. Id. at 1922 (“[W]e have
never held that FAA imposes a duty on States to render all forms of representative
standing waivable by contract.”). But the second rule does not: the “prohibition on
contractual division of PAGA actions into constituent claims,” the Supreme Court
observed, “unduly circumscribes the freedom of parties to determine ‘the issues subject
to arbitration’ and ‘the rules by which they will arbitrate.’” Id. at 1923.
“If the parties agree to arbitrate ‘individual’ PAGA claims based on personally sustained
violations,” the Supreme Court continued, “Iskanian allows the aggrieved employee to
abrogate that agreement after the fact and demand either judicial proceedings or an
arbitral proceeding that exceeds the scope jointly intended by the parties.” Id. at 1924.
“As a result,” the Supreme Court held that “Iskanian’s indivisibility rule effectively
coerces parties to opt for a judicial forum,” which is “incompatible with the FAA.” Id.
The Supreme Court summarized its holding as follows:
We hold that the FAA preempts the rule of Iskanian insofar as it precludes
division of PAGA actions into individual and non-individual claims through an
agreement to arbitrate. This holding compels reversal in this case. The
agreement between Viking and [the plaintiff] purported to waive ‘representative’
PAGA claims. Under Iskanian, this provision was invalid if construed as a
wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian
is not preempted by the FAA, so the agreement remains invalid insofar as it is
interpreted in that manner.
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PAGA Litigation Review – 2023
