Private Attorneys General Act Review – 2023 - Report - Page 9
I.
Introduction
Prior 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 most
effective 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 of
their co- workers as well as the State. If successful, aggrieved employees receive
25% of any recovered civil penalties and pass the other 75% to the California
Labor and Workforce Development Agency (LWDA). The PAGA authorizes the
attorneys who pursue the action to collect their attorney’s fees and costs in
addition to the civil penalties.
In 2014, the California Supreme Court ruled in Iskanian v. CLS Transportation Los
Angeles that the Federal Arbitration Act (FAA) does not preclude the California
Legislature from deputizing employees to prosecute violations of the California
Labor Code on behalf of the state and, therefore, does not preempt a state law
that prohibits waiver of PAGA representative actions. This ruling led to an
explosion of PAGA notices in 2014, which generally grew year over year until
2022.
In 2022, PAGA actions saw their first setback as a workaround to arbitration. In
June 2022, the U.S. Supreme Court held in Viking River Cruises that the FAA
preempts California law to the extent that such law would preclude an arbitration
agreement from dividing a PAGA action into its individual and non-individual
components. The U.S. Supreme Court ruled that an employer could compel an
employee 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 or
her individual claim, the plaintiff no longer had standing to maintain a
representative PAGA action in court.
This was obviously a favorable ruling for employers, but Justice Sotomayor’s
concurrence complicated matters. It noted that, if the Supreme Court’s analysis of state
law was wrong regarding a plaintiff’s lack of standing to maintain a representative PAGA
action if the individual PAGA action was compelled to arbitration, then California courts
would have the last word.
Taking Justice Sotomayor’s cue, the Supreme Court of California decided to address
this issue in Adolph v. Uber Technologies a month later in July 2022. Adolph is set to
decide what happens to the representative PAGA claim when the individual PAGA claim
has been sent to arbitration. Since Viking River and pending Adolph, California state
courts have been grappling with how to handle such representative claims, with most
state courts staying, rather than dismissing, the representative PAGA claims. Most
experts anticipate a ruling in Adolph by late summer 2023.
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© Duane Morris LLP 2023
PAGA Litigation Review – 2023
