In a repudiation of the California Supreme Court’s holding in Iskanian v. CLS Transp. Los Angeles (2014) 59 Cal.4th 348, the United States Supreme Court ruled in Viking River Cruises, Inc. v. Moriana (2022) __ U.S. __ that individual claims brought under California’s Private Attorney General Act (“PAGA”, Cal. Lab. C. § 2699, et seq.) are subject to arbitration under the Federal Arbitration Act (“FAA”).
Angie Moriana was employed by Viking River Cruises as a sales representative. At the commencement of her employment, she executed an agreement to arbitrate any dispute arising out of her employment. The agreement contained a “class action waiver” providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action. The arbitration agreement also contained a severability clause specifying that if the waiver was found invalid, in part, any portion of the waiver that remained valid would be enforced in arbitration.
After leaving her employment, Moriana brought a PAGA action against Viking River Cruises alleging various Labor Code violations. Viking moved to compel arbitration. The trial court denied the motion based on the California Supreme Court’s holding in Iskanian. In that case, the California Supreme Court held that pre-dispute agreements to waive the right to bring representative PAGA claims are invalid as a matter of public policy. In its decision in Viking River Cruises, the United States Supreme Court found that the holding in Iskanian preventing arbitration of individual claims was preempted by the FAA. In reaching this decision, the United States Supreme Court noted the dual nature of PAGA actions. On the one hand, a PAGA plaintiff asserts claims against their employer for violation of the Labor Code on behalf of themselves. Simultaneously, that same PAGA plaintiff asserts representative claims against their employer for Labor Code violations on behalf of all similarly situated current or former employees. In Iskanian, the California Supreme Court found that the individual and representative nature of PAGA actions could not be severed from one another. The United States Supreme Court disagreed and held in Viking River Cruises that “the FAA preempts the rule in Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.”
Of course, as the United States Supreme Court noted, the FAA’s preemption of the holding in Iskanian preventing arbitration of individual PAGA claims still leaves the question open of what happens to the representative claims once arbitration of the individual claims has been ordered. The Court commented that “[u]nder our holding in this case, those claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.” The Court further commented, however, that “[u]nder PAGA’s standing requirement, a plaintiff can maintain non-individual [i.e., representative] PAGA claims in an action only by virtue of also maintaining an individual claim in that action.” Thus, “[w]hen an employee’s own dispute is pared away from a PAGA action, … [the employee] lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.”
Viking River Cruises represents a tremendous victory for employers in the face of mounting PAGA actions in California Courts. It should lead employers to rethink the use of arbitration agreements with employees and the inclusion of class and PAGA representative action waivers in those agreements. Such agreements can now become a powerful tool for employers in limiting potential PAGA liability in the future.
Questions
If you have any questions regarding this Legal Alert, please contact the following attorney or any of Kronick’s Labor and Employment Practice Group lawyers.
David Tyra
dtyra@kmtg.com | 916.321.4594
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