On July 17, 2023, the California Supreme Court issued its highly-anticipated ruling in Erik Adolph v. Uber Technologies, Inc., closing the final chapter of the drama we’ve been calling the PAGA saga.
The PAGA saga
The California Private Attorney General Act (PAGA) gives employees the right to sue employers for violations of the California Labor Code on behalf of the state, essentially as private attorneys general. PAGA allows employees to sue employers both as an individual and on behalf of other employees who were victims of labor code violations. There can be significant penalties for employers, and as a result, this law has faced constant challenges.
Background
In 2014, the California Supreme Court ruled that employers cannot require employees to arbitrate either individual or representative PAGA claims. Because this ruling meant that employers could no longer rely on efficient and inexpensive arbitrations to resolve their disputes, there have been many challenges to the law.
On July 15, 2022, the United States Supreme Court overruled the California Supreme Court’s prior decision in Viking River Cruises v. Moriana, ruling that employees can waive their right to litigate individual PAGA claims. The Court left intact the California rule prohibiting waivers of representative PAGA claims. The Supreme Court also ruled that if an individual PAGA claim is subject to mandatory arbitration, the employee lacks standing to bring a representative PAGA claim in court. But the Supreme Court left the door open to the California Supreme Court to interpret the law differently, which brings us to the new ruling from that court.
New Ruling
In Adolph v. Uber, the California Supreme Court issued another blow to employers by restricting their ability to avoid costly representative PAGA claims. The court ruled that PAGA only requires two things for an employee to have standing to sue: (1) that they are someone “who was employed by the alleged violator,” and (2) that they were someone “against whom one or more of the alleged violations was committed.” In interpreting the statute and other case law, the court held that forcing an employee to arbitrate their individual claim doesn’t mean they’re prohibited from litigating their representative claim in court.
It may now be left to trial courts to determine whether representative claims should be put on hold until arbitrations of individual PAGA claims are complete and what effect those arbitration awards will have on the parallel representative claims. If an employee’s individual PAGA claim is unsuccessful in arbitration, they won’t have standing to litigate a representative PAGA claim.
Next Steps
Because the California Supreme Court has the last word when it comes to interpreting California law, it’s now clear that employees may be required to arbitrate their individual claims, but they do not lose standing to bring representative PAGA claims in court. How trial courts decide to handle cases that come before them is yet to be seen and is an issue likely to be long unsettled.
There is still one hope for employers who want to see PAGA gone, and it rests with the voters who will decide whether to approve the California Fair Pay and Employer Accountability Act, repealing PAGA altogether. This issue is on the ballot in November 2024.
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