07.28.2022 | Newsletters

Filing a PAGA Lawsuit No Longer Guarantees that Employees Can Avoid Their Arbitration Agreements

By Charles R. Hellstrom
Employment law

California’s Private Attorney General Act (“PAGA”) permits employees to bring lawsuits against their employers for Labor Code violations, with the employee acting as a “representative” of the State. In these PAGA lawsuits, the employee representative can recover civil penalties for Labor Code violations that the employee representative suffered, as well as for violations suffered by other employees.

Until last month, if an employee filed a PAGA lawsuit, California law prohibited compelling any part of the PAGA claim to arbitration, even if the employee had signed a valid arbitration agreement.

Last month, in Viking River Cruises, Inc. v. Moriana, the U.S. Supreme Court changed all that. The Court overruled existing California law, holding that claims under PAGA can be split into “individual” claims and “non-individual” claims (representative claims brought on behalf of other employees), and that an employee’s individual PAGA claim may be compelled to arbitration under an arbitration agreement. The Court further held that, once an employee’s individual PAGA claims are compelled to arbitration, the non-individual PAGA claims cannot be maintained in court and should be dismissed.

The Viking River Cruises opinion confirmed that California’s ban on “wholesale waivers” of employee’s rights to bring representative PAGA claims in court is still valid.

A key takeaway is that, under a valid employee arbitration agreement, employers can require arbitration of employee PAGA claims on an individual basis. However, because the U.S. Supreme Court found that “wholesale waivers” of PAGA claims are not preempted by the FAA, employers should carefully draft their arbitration agreements.

We recommend that you review your employee arbitration agreements and update them as necessary to take advantage of this change in the law. This is the latest of several changes in the law over the past few months that have caused us to recommend revisions to employee arbitration agreements. So, while it may seem tiresome to revisit those agreements again, the benefits of the Viking River decision make it worthwhile for you to do so.

Related practice team: Labor and Employment

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