California: Individual PAGA Arbitration Enforceable!

Applies to:          All Employers with CA Employees

Effective:             June 15, 2022

In Viking River Cruises v. Moriana, the U.S. Supreme Court recently said that individual employee Private Attorney General Act (PAGA) claims are arbitrable when based on a valid arbitration agreement. This ruling specifically addressed the previously existing Iskanian rule put forth by the California Supreme Court, which said that individual PAGA claims could not be arbitrated according to agreement because they could not be separated from nonindividual (“representative”) PAGA claims. The U.S. Supreme Court said that the Iskanian rule conflicted with and was preempted by the Federal Arbitration Act (FAA).

There, an employee signed an arbitration agreement with class action waiver. The agreement specifically called for individual PAGA claims to be arbitrated. Under the FAA, arbitration agreements must be treated the same as any other contract. However, the Iskanian rule prohibited parties from mutually agreeing to arbitrate the individual portion of a PAGA claim. Because of this conflict between the FAA and Iskanian, the Supreme Court said the rule is preempted by the FAA. Ultimately, the Court said that employee PAGA claims can be divided (through arbitration agreements) into (1) individual PAGA claims resolved via arbitration and (2) nonindividual PAGA claims resolved in court.

Moreover, PAGA itself does not allow a representative claim to survive in court without the individual portion of the claim. The Court said that, because of this statutory limitation, the remaining representative portion of the PAGA court claim had to be dismissed. In short, the only piece of the PAGA claim that survived was the individual claim subject to the arbitration agreement. However, the Court left open the possibility that state legislators may revise PAGA to allow representative actions to stand on their own.

Action Items

1. Have arbitration agreements updated consistent with the ruling.
2. Review existing litigation with legal counsel for arbitration coverage.
3. Subscribers can call our HR Hotline at (833) 268-5531 for further assistance.