California Supreme Court: PAGA Plaintiffs Can Pursue Representative State Court Claims Even if Their Individual PAGA Claims Are Compelled to Arbitration

At a Glance

• The California Supreme Court recently held that Private Attorneys General Act (PAGA) plaintiffs do have standing to pursue their representative PAGA claims in state court even if their individual PAGA claims are compelled to arbitration.
• In doing so, the California Supreme Court disagreed with the U.S. Supreme Court’s interpretation of the California law.

On July 17, 2023, the California Supreme Court unanimously held in Adolph v. Uber Technologies, Inc. that even if a plaintiff who brings a claim under California’s Private Attorneys General Act (PAGA) has their individual PAGA claims compelled to arbitration, their representative PAGA claims (i.e., their non-individual claims on behalf of other current and former employees) are not subject to arbitration and may proceed in state court. In doing so, the Court expressly disagreed with the United States Supreme Court’s interpretation of California law in its 2022 Viking River Cruises, Inc. v. Moriana decision.

By way of background, in 2022, the U.S. Supreme Court ruled in Viking River Cruises that, contrary to pre-existing California and Ninth Circuit precedent, the individual portion of a plaintiff’s PAGA case could be severed from the non-individual PAGA claims and compelled to arbitration — if the arbitration agreement so provided. The Court held that once the individual portion of a plaintiff’s PAGA claim is compelled to arbitration, the plaintiff would have no standing to pursue the representative claims, and as such, such representative claims should therefore be dismissed.  However, as Justice Sotomayor pointed out in her concurring opinion in Viking River Cruises, California courts would “have the last word” on the issue of standing in the event the U.S. Supreme Court was incorrectly interpreting California law.

Now, the California Supreme Court has had the last word, and has decisively disagreed with the U.S. Supreme Court’s interpretation. The California Supreme Court found that if a plaintiff is compelled to arbitrate their individual claims, the plaintiff does not lose “standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.” (Italics added.)

In reaching its conclusion, the California Supreme Court relied upon the fact that the PAGA statute defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” California’s highest court stated that the fact that any such individual claim is compelled to arbitration does not change the fact that the plaintiff in question has standing under those two requirements. Indeed, an “aggrieved employee” has standing to litigate on behalf of other employees just by sustaining a Labor Code violation committed by his or her employer. The Court held that a narrower definition of standing would hamper the legislature’s intent of allowing for broad enforcement of employment laws by employees.

While this decision certainly creates more challenges for employers, the California Supreme Court did perhaps give one silver lining for employers: a trial court may stay any representative claims pending the outcome of the individual arbitration. Should the arbitrator determine that the plaintiff is not an aggrieved employee and should the trial court confirm the determination and reduce it to final judgment, the plaintiff would no longer have standing to pursue their representative claims.

Employers should take note of this decision and consult with legal counsel to ensure compliance with the California Supreme Court’s ruling.