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SPECIAL ALERT FOR EMPLOYERS – California Supreme Court Decides PAGA case

The California Supreme Court recently issued an important ruling regarding Employee’s rights to bring claims against employers under the California’s Labor Code Private Attorneys General Act (“PAGA”) in the case Viking River Cruises v. Moriana. Here is what Employers should know.

The issue presented in Viking River Cruises was whether the Federal Arbitration Act (“FAA”) preempts the California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, 58 Cal.4th 380 (2014), which invalidated contractual waivers of representative claims under PAGA.

First, the Court found that an arbitration agreement cannot prevent an employee from bringing a PAGA claim altogether. Second, the FAA allows arbitration agreements to require employees to bring their individual PAGA claims in arbitration. Third, the FAA prevents the employee’s individual PAGA claim from being forcibly bundled with non-individual PAGA claims arising from Labor Code violations sustained by other employees. Lastly, the Court ruled that where individual PAGA claims are compelled to arbitration, the non-individual PAGA claims that remain in court should be dismissed, because the employee no longer has standing to pursue such claims in court.

Ultimately, this means that employers may now compel individual PAGA claims to arbitration. However, employers should anticipate litigation as parties challenge whether a particular arbitration agreement qualifies under the new standards.

Based on this ruling, and others, arbitration agreements should generally cover the following:

  • Include the employee’s individual PAGA claims within the scope of covered claims subject to arbitration
  • Include a representative action waiver sufficient to permit individual PAGA claims but disallow representative PAGA claims in arbitration, while being careful to avoid language from being interpreted as a forbidden “wholesale waiver” of representative PAGA claims
  • Include a severability clause to ensure that all lawful provisions authorized by Viking River Cruisesare enforced and survive legal challenges designed to misconstrue the meaning of the representative waiver

The dismissal of the costly non-individual PAGA claims from court can be a significant benefit to employers in these cases. Note, it is anticipated that the California Legislature may seek to revise PAGA’s standing requirements and provide an alternative for continuing representative PAGA lawsuits in the courts.

To ensure that your Arbitration Agreements are compliant contact the experienced attorneys at VRS.