California Employment Law Blog

PAGA Update: What You Need to Know About Arbitrating Individual Claims

Posted by Timothy B. Del Castillo | Jun 05, 2024 | 0 Comments

The Private Attorneys General Act (PAGA) enables employees in California to act as private enforcers of the Labor Code, allowing them to sue for violations not only affecting themselves but also on behalf of others. Distinctly, PAGA distinguishes between "individual" claims, which are personal to the plaintiff, and "non-individual" claims that address collective labor code violations.

A pivotal moment in PAGA's legal journey occurred in 2014 with the Iskanian ruling by the California Supreme Court. It struck down arbitration agreements that waived the right to pursue non-individual PAGA claims, aligning with state public policy. However, in 2022, the landscape shifted with the Viking River decision by the U.S. Supreme Court, which upheld the prohibition against waiving non-individual PAGA claims yet emphasized that the Federal Arbitration Act (FAA) overrides PAGA's stipulation that individual and non-individual claims must be tried together. This effectively allowed individual PAGA claims to be arbitrable.

Viking River also posited that once an individual PAGA claim had been arbitrated, the plaintiff would lose standing to pursue non-individual claims in court, suggesting a lack of legal mechanism within PAGA to address non-individual claims independently. However, Justice Sotomayor expressed that California courts should ultimately interpret PAGA's intricacies.

In response to this legal ambiguity, the California Supreme Court in Adolph (2023) clarified that plaintiffs could indeed arbitrate individual PAGA claims while still retaining the standing to bring non-individual claims to court. This decision was pivotal for the subsequent case of Johnson v. Lowe's Home Centers, LLC (2024), where the Ninth Circuit Court of Appeal had to navigate the evolving legal terrain post-Adolph.

The Ninth Circuit affirmed the district court's decision to compel arbitration for Johnson's individual PAGA claim, in line with her employment contract's arbitration clause. However, it vacated the dismissal of her non-individual claims, aligning with Adolph's principle that arbitration of individual claims does not preclude court litigation of non-individual claims. This ruling also dismissed Lowe's contention that Adolph and Viking River were incompatible, underscoring that individual PAGA claims could be arbitrated while non-individual claims could proceed in court, in accordance with both the FAA and Viking River's stance.

This series of decisions underscores the nuanced legal landscape surrounding PAGA, emphasizing the rights of employees to arbitrate individual claims without forfeiting their ability to litigate collective actions in court. It advises employers to craft arbitration agreements with precision to comply with evolving legal standards and highlights the importance of employees to remain informed of their rights under PAGA. Given the complexity of California's employment laws, seeking legal expertise in employment disputes is crucial for both employers and employees.

About the Author

Timothy B. Del Castillo

Tim Del Castillo is Founding Partner of Castle Law: California Employment Counsel, PC.


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