The California Supreme Court carved out a victory for workers this week, limiting the impact of a U.S. Supreme Court decision that gave more power to employers in avoiding class actions.
The ruling concerns California’s Private Attorneys General Act (PAGA). PAGA authorizes an employee to bring a civil claim against an employer “on behalf of himself or herself and other
current or former employees” for alleged violations of California’s Labor Code. Under PAGA, the aggrieved employee is acting as a “proxy” or agent of the state’s Labor and Workforce Development Agency. PAGA empowers employees to bring class actions against employers who violate workers’ rights en masse.
In recent years, employers have fought to limit the ability of individual workers to band together for class actions. Employers now often require workers to sign binding arbitration agreements as a condition of employment or in exchange for severance pay. Arbitration is an inherently private affair, unlike traditional lawsuits, and cannot be pursued as a class. It’s often impractical for employees or consumers to bring individual claims against larger, more powerful parties, which is why they rely on class actions where available.
California and the U.S. Supreme Court have been at odds with one another regarding when and whether such arbitration agreements are enforceable. The nation’s high court has generally held that the Federal Arbitration Act (FAA) requires enforcement of arbitration agreements under most circumstances, while California lawmakers and courts have tried to carve out protections against arbitration agreements they see as unfair to employees and consumers.
Last year, in Viking River Cruises, Inc. v. Moriana, the Supreme Court held that employers can enter enforceable pre-dispute agreements with employees that explicitly waive PAGA claims. The ruling overturned a decision from the California Supreme Court that prohibited employers from enforcing such waivers. Viking River Cruises also held that, because the plaintiff’s individual PAGA claims were limited to arbitration, they no longer had standing to bring their nonindividual (or representative) PAGA claims in court.
This week, in Adolph v. Uber Technologies, Inc., the California Supreme Court affirmed the core holding of Viking River Cruises--the FAA requires PAGA plaintiffs subject to a PAGA waiver to arbitrate their individual claims concerning alleged labor law violations. The state high court, however, deviated from the U.S. Supreme Court on the question of standing and severability.
The California court ruled that, even if the plaintiff employee was compelled to arbitrate his individual claims, he retained the right to bring class claims against Uber: “Where a plaintiff has brought a PAGA action comprising individual and nonindividual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.”
In so holding, the California court essentially ruled that the U.S. Supreme Court had misinterpreted California state law. PAGA was meant to empower aggrieved employees to sue on behalf of other injured workers in order to curb labor law violations. Relying on an “interpretation of the statute that impedes an employee’s ability to prosecute his or her employer’s violations committed against other employees would undermine PAGA’s purpose of augmenting enforcement of the Labor Code.”
In light of the state high court’s ruling, the plaintiff in the Uber litigation is empowered to continue pursuing class claims against Uber. The trial court may elect to issue a stay of the class proceedings until the plaintiff’s individual claim has been arbitrated. Other employers can expect to continue facing labor law class actions regardless of their attempts to evade PAGA by way of binding arbitration.
