Time to Revise Your Arbitration Agreements: Supreme Court Holds PAGA Claims Can Be Compelled to Arbitration
Today, the United States Supreme Court issued a significant decision allowing the arbitration of claims under the Private Attorney General Act (“PAGA”). The Court’s decision in Viking River Cruises v. Moriana provides that employers may now compel an employee’s individual PAGA claims to arbitration. Under prior California precedent, PAGA claims could not be compelled to arbitration meaning that even with class action waivers, an individual employee could bring PAGA claims on behalf of all aggrieved employees and require a court to determine the outcome. Under the Court’s new standard, the PAGA claims of individual employees can be compelled to arbitration if that employee signed a properly worded arbitration agreement. Importantly, the Court also clarified that once an individual employee’s PAGA claims are compelled to arbitration, that employee loses the ability to seek PAGA penalties on behalf of other employees. When paired with an enforceable class action waiver, signed arbitration agreements can now require individual employees, and former employees, to arbitrate their individual claims, including PAGA claims, effectively preventing class action treatment of wage and hour claims and preventing PAGA actions on behalf of all aggrieved employees. In other words, employers would then only be faced with arbitrating the claims of a single employee. Period.
This is a development that every employer should take advantage of. Employers should look to update their arbitration agreements to provide for arbitration of employee’s individual PAGA claims in addition to having a class action waiver. Doing so will provide a significant defense to future PAGA litigation and may greatly reduce potential exposure.
In other PAGA news, proponents of the Fair Pay and Employer Accountability Act, which seeks to significantly limit PAGA and return to the pre-2004 days when the Labor Commissioner, and not the courts, determined most claims based on alleged violations of the Labor Code, have announced this initiative will not appear on the November ballot. A coalition of farmers, car dealers, trucking companies and other industry groups pushing the proposed initiative said that they now intend to get the initiative on the 2024 ballot. While this delay does not provide relief to employers in the short term, the Viking River Cruises decision provides an immediate and significant defense against future PAGA litigation.
Stradling has prepared a model arbitration agreement which allows employers to compel PAGA claims to arbitration. We encourage you to reach out to your Stradling attorney to implement an arbitration agreement or to update your current arbitration agreement to take advantage of these new developments.
