I’ve been MIA on this blog for a long while as a result of lots of goings-on in life, including a new addition to the family. But this development is so big that I had to come back for this one: Viking River Cruises is out!
TLDR: if an arbitration agreement with a representative-action waiver applies to an employee-plaintiff’s claims against an employer (including a representative PAGA claim), the plaintiff can only prosecute the PAGA claim in arbitration and only for violations that the plaintiff personally suffered. This what SCOTUS calls an "individual PAGA claim," even though the State of California really is the real party in interest (and the principle of the employee/plaintiff agent). Because, as SCOTUS interprets it, in a PAGA action the State is asserting multiple claims, separate alleged violations against multiple employees, each of which constitute a claim.
This is a major change in California wage-hour law. Legislative action or further state-court interpretation to follow?
What happens to the remainder of the PAGA claims after the individual plaintiff is compelled into individual arbitration? Since the text of the PAGA statute does not provide for what happens to the “non-individual PAGA claims” when an individual is required to arbitrate their “individual PAGA claim” in arbitration, SCOTUS held that the remaining claims must be dismissed:
PAGA provides no mechanism to enable a court to adjudicate nonindividual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. See Cal. Lab. Code Ann. §§2699(a), (c). When an employee’s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. See Kim, 9 Cal. 5th, at 90, 459 P. 3d, at 1133 (“PAGA’s standing requirement was meant to be a departure from the ‘general public’ . . . standing originally allowed” under other California statutes). As a result, Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.
Slip Op. at 21.
But Justice Sotomayor gave a hint about possible ways to allow prosecution of the “non-individual PAGA claims” in court that the Moriaga plaintiff could not pursue under SCOTUS’s opinion. First, a California state court could hold that the PAGA does allow standing to continue pursuing those non-individual PAGA claims in state court by the same PAGA plaintiff (who is also prosecuting an individual PAGA claim in arbitration); second, the California Legislature can revise the PAGA:
Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last 2 VIKING RIVER CRUISES, INC. v. MORIANA SOTOMAYOR, J., concurring word. Alternatively, if this Court’s understanding is right, the California Legislature is free to modify the scope of statutory standing under PAGA within state and federal constitutional limits.
Sotomayor, Slip Concurring Op. at 1-2.
We of course expect to see some situations where a group of employees bring separate, individual arbitration demands against the same employer, each invoking PAGA on behalf of violations that they individually suffered. (the mass-arbitration actions against Chipotle come to mind.)
One of the next big questions: where a plaintiff who is not subject to an arbitration agreement (with a representative-action waiver) brings a PAGA action in court, can the employer carve out from the court action those employees who are subject to such arbitration agreements (e.g., similar to a class action where part of the class is covered by arbitration agreements)?
From the opinion, at least two arguments easily follow. On one hand, the non-signatory plaintiff is not bound by any agreement to limit the scope of the PAGA action. But on the other, SCOTUS has now defined PAGA as one party (the California Labor and Workforce Development Agency via its agent the PAGA plaintiff) asserting multiple claims, and those claims that are governed by arbitration agreements can be forced into arbitration. So, following that reasoning, the court action cannot include those claims that can be forced into arbitration.
The answer may follow in another case (or, more likely, cases) . . . unless there is a legislative change to the PAGA first.
Link to the slip opinion here.