Supreme Court Reverses California’s Decision on PAGA Claims

If you haven’t been following the Viking River Cruises, Inc. v. Moriana case, we’ll quickly get you up to speed. In short, the plaintiff of the case, Angie Moriana, was an employee of Viking River Cruises. When hired, Moriana agreed to a contract specifying that any employment disputes would be compelled to arbitration, waiving class action and PAGA claims. Later, Moriana sought to bring a PAGA action against Viking, arguing that a PAGA suit was still viable as per the California Supreme Court’s ruling in Iskanian v. CLS Transportation Los Angeles, LLC (2014), where it was ruled that PAGA waivers are unenforceable. Viking, in turn, moved to compel arbitration, arguing that the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis (2018) took precedence over Iskanian. 

The trial court first denied Viking’s motion. The case then moved its way up to the California Court of Appeal, which confirmed the trial court’s decision. In June, however, the U.S. Supreme Court reversed this decision, ruling that Viking is indeed entitled to compel arbitration as the contract specified. This ruling will have a big impact on California employers, who are likely all too aware of the PAGA suits that have plagued many businesses for the past eight years.

Reprieve for California Businesses

Employers should feel more confident in their employment agreements as their arbitration clauses are, for the time being, enforceable. It is important to note that Supreme Court Justice Sotomayor included in her opinion that the California legislature is free to modify PAGA law, so this issue isn’t completely settled just yet. For now, however, California employers may specify in arbitration agreements that PAGA claims must be arbitrated, on an individual basis. 

In effect, the Supreme Court’s ruling rested on the way that PAGA allows one employee to speak for all of a company’s employees so that any and all potential labor violations the employer might have committed can be penalized at one time. The ruling stated that PAGA does not supply any means by which a court can adjudicate group PAGA claims if an individual claim has been compelled to arbitration, and that the individual can only maintain their group PAGA claim as long as their individual claim still stands – meaning that if the individual claim is compelled to arbitration, the group claims must be dismissed. As such, arbitration agreements must specify that individual claims are compelled to arbitration, as the Federal Arbitration Act does not permit complete a waiver of PAGA claims. 

All California businesses should take time to review their arbitration agreements and ensure that they are in line with this new ruling. For assistance in examining your company’s contracts and ensuring your business is compliant with California law, contact Integrated General Counsel today.

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