With Adolph v. Uber Technologies, Inc. (2023), the California Supreme Court has provided much-needed clarification regarding the ability of employees who are compelled to arbitrate individual PAGA claims to still pursue non-individual PAGA claims in court. According to today's decision, an order compelling arbitration of individual claims does not strip a plaintiff of standing as an "aggrieved employee" to litigate claims on behalf of other employees under PAGA.
This decision was influenced by many previous cases, most notably Iskanian v. CLS Transportation Los Angeles, LLC (2015) and the United States Supreme Court's Viking River v. Moriana (2022).
In Iskanian, the California Supreme Court established that agreements or contracts which waive the right to bring a PAGA claim before any dispute arises are unenforceable. However, the Supreme Court in Viking River held that arbitration agreements requiring employees to arbitrate individual PAGA claims can indeed be enforced. This left the question of whether employees compelled to arbitrate individual claims retain standing to pursue non-individual PAGA claims unresolved.
In Adolph v. Uber Technologies, Inc., the plaintiff, Erik Adolph, filed a lawsuit against Uber, alleging misclassification as an independent contractor and seeking reimbursement for business expenses. Initially, the trial court compelled arbitration for Adolph's individual claims. However, Adolph later removed these individual claims, opting to pursue only a PAGA claim. The trial court issued a preliminary injunction to halt arbitration, leading Uber to appeal the decision.
The Court of Appeal upheld the trial court's ruling, stating that representative PAGA claims cannot be subjected to arbitration. The Court of Appeal argued that waiving the right to bring a PAGA claim on behalf of other employees violates public policy and is unenforceable under California law. Uber appealed the decision, and during the proceedings, the United States Supreme Court issued its Viking River decision.
Taking Viking River into account, the California Supreme Court determined that the enforcement of an agreement to arbitrate an employee's individual PAGA claim does not affect the standing of that employee to pursue non-individual PAGA claims. As per Adolph, a worker becomes an "aggrieved employee" with standing to litigate non-individual PAGA claims upon experiencing a Labor Code violation committed by their employer. This standing is not negated even if the worker has already arbitrated their individual PAGA claim and has not personally suffered other alleged violations in the non-individual claim.
This expansive approach to standing adopted in Adolph supports the state's interest in effectively enforcing PAGA, which serves as a law enforcement mechanism for the Labor and Workforce Development Agency (LWDA). As Adolph explains, PAGA's aim is to fund the LWDA by allocating a significant portion of civil penalties recovered in PAGA actions to the state. If PAGA standing was limited by arbitration agreements to encompass non-individual claims, the whole purpose PAGA would be undermined, reducing state funding and increasing state costs related to enforcement.
Applying this approach to the case at hand, the California Supreme Court found that since Adolph had alleged Labor Code violations during his employment with Uber, he had established standing to bring a non-individual PAGA claim on behalf of all "aggrieved employees."
For all California employers and employees, this ruling is significant as it confirms that employees who were compelled to arbitrate individual PAGA claims can still pursue non-individual PAGA claims in court. In an ever evolving legal landscape, employers and employees should seek guidance from competent legal counsel to determine the best course of action in cases involving arbitration agreements and PAGA claims.