The Private Attorneys General Act (PAGA) has been in effect in California since 2004 and enables plaintiffs to sue employers over violations of California's Labor Code on behalf of the state. The resulting lawsuits generally see most of the money paid out to the State of California to support the State's Labor Code enforcement efforts.PAGA cases are procedurally easier to bring than a standard class-action lawsuit, and they often result in significant penalty awards.
PAGA's importance to wage-and-hour litigation has increased exponentially since the United States ruled that employers can require employees to waive the right to a class action through an agreement to arbitrate on an individual basis, and the California Supreme Court's subsequent ruling that PAGA claims cannot be similarly subject to waiver. Earlier this month, the United States Supreme Court has granted review to Viking River Cruises, a case which may allow arbitration agreements between employers and employees to preempt PAGA claims as well.
Viking Cruises argues that the Federal Arbitration Act (FAA) requires the enforcement of bilateral arbitration agreements and preempts state laws like PAGA. Viking further argues the US Supreme Court's previous rulings in AT&T Mobility and Epic Systems require enforcement of arbitration agreements against PAGA claims.
The US Supreme Court is expected to release an opinion in the Spring or Summer of 2022. While the outcome is not certain, the present Court's generally conservative leanings coupled with its pro-arbitration holdings in AT&T Mobility and Epic Systems lead most commentators to believe the Court will hold that the FAA preempts PAGA and employers can enforce arbitration agreements with PAGA waivers.
If the result plays out as predicted, employers (especially those with many employees), will have an opportunity to protect themselves from PAGA actions. Mandatory individual arbitration can have its downsides for employers, however. California law requires employers to foot the entire bill for private arbitrations, which can be quite pricey, especially if multiple arbitrations are filed against the same employer by multiple individuals.
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