The U.S. Supreme Court in a near-unanimous decision in Viking v. Moriana has agreed that claims brought under the California Private Attorneys General Act (PAGA) can be compelled to arbitration.
Justice Samuel Alito authored the 8-1 decision, with all the justices except Clarence Thomas joining in the sections outlining the court’s take on PAGA and how it is preempted by the Federal Arbitration Act (FAA).
The decision, issued June 15, remanded the case back to the California courts, “for further proceedings not inconsistent with this opinion.”
By specifically addressing why PAGA is subject to arbitration, the high court overruled holdings in an earlier California court decision, Iskanian v. CLS Transportation, Ashley Hoffman, a labor and employment policy advocate with the California Chamber of Commerce, told the Northern California Record.
Under Iskanian, the California courts held that even if a plaintiff had signed an arbitration agreement, their PAGA claim could not be compelled to arbitration.
“This led to not only an increase in the number of PAGA claims, but if you had a case where you had a PAGA claim and then other claims, you could be in situation where some of those could be compelled arbitration, but the PAGA claim could not,” Hoffman said.
Because PAGA claims would be grouped with other claims, it kept the pattern of very expensive predatory PAGA lawsuits continuing, Hoffman said.
With the Viking decision, PAGA claims won’t be valid if an arbitration agreement is in place, as the court found PAGA’s claim joinder – the grouping together of several suits or parties – is incompatible with arbitration, and in that way is preempted by the FAA.
“We think that such a conflict between PAGA’s procedural structure and the FAA does exist, and that it derives from the statute’s built-in mechanism of claim joinder,” the court wrote.
The Viking decision also discusses the California rule that prohibits parties from contracting around this joinder device and several SCOTUS precedents involving the FAA, including Lamps Plus v. Varela from 2019.
“[S]tate law cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate,” the court wrote.
Hoffman noted the Viking decision doesn’t mean PAGA claims are going away, and plaintiffs’ attorneys may still challenge arbitration agreements in court.
But the case brings further awareness to what the SCOTUS terms the “additive dimension” of the PAGA statute.
“An employee who alleges he or she suffered a single violation is entitled to use that violation as a gateway to assert a potentially limitless number of other violations as predicates for liability. This mechanism radically expands the scope of PAGA actions,” the court wrote.
Hoffman noted the ruling was not a split decision. “I really hope that people pay attention to that piece of it,” Hoffman said. “Breyer and Kagan and really Sotomayor, all three of them agreed with that section, and I think that’s significant.”
In recent years, including with AB 51, California has tried to limit arbitration.
The Viking decision is a continued reminder that the FAA is a strong piece of legislation that favors arbitration, Hoffman said.
“While we are happy with the ruling, we are at the same time not that surprised,” Hoffman said. “Because I think the court has been pretty consistent about what preempts the FAA, and that's pretty noticeable by the fact that it was an 8-1 decision.”
It remains to be seen how the ruling restricts some of the ways in which PAGA is used.
“There are some cases that had said, if you settle your individual claim, you can still be a PAGA plaintiff; if you have time-barred claims, you could be a PAGA plaintiff, and I think this undercuts that and places some limits on PAGA, which is very needed,” Hoffman said.
“It will hopefully help curb some of the abusive PAGA lawsuits,” Hoffman said. “By limiting a plaintiff's ability to bring these claims on behalf of others for violations that they didn’t even experience.”
Attorneys who are repeat PAGA filers are known to the employment defense community, Hoffman said. “Ones that will not settle for less than ‘X’ amount, no matter the case, this kind of jeopardizes their taking advantage of that in some way.”
While Attorney General Rob Bonta and plaintiff lawyers’ organizations had argued on behalf of Moriana in amicus briefs submitted to the SCOTUS, Hoffman noted that extensive remedies remain for plaintiffs in such cases, including filing with the Labor Commissioner. A recent PAGA study has shown that claims before the Labor Commissioner are settled faster and provide employees with bigger settlements because the PAGA pay structure for attorneys is not involved.