For nearly a decade, uncertainty and disagreement have reigned over statutory interpretations of California’s Private Attorneys General Act’s standing requirement. Who exactly was this “aggrieved employee” archetype the California legislators created and deputized to use the state’s power to enforce the law and prosecute Labor Code violations against their employer?[1] Ultimately, even the U.S. Supreme Court and California Supreme Court could not agree––but it was Justice Liu’s July 17, 2023 opinion in Adolph v. Uber Technologies that settled the question and where the California Supreme Court had the “last word”.[2]

What is the Private Attorneys General Act?

The Private Attorneys General Act, better known by its acronym “PAGA”, originated from the California State Legislature’s concern that violations of its Labor Code were pervasive and underenforced, as well as a pragmatic understanding the government lacked resources to pursue enforcement effectively.[3] To address these concerns, the legislature came up with a solution reminiscent of the “Old West”––because through PAGA, the legislature provides an “aggrieved employee” who has suffered Labor Code violations by their employer the right to prosecute such violations “on behalf of himself or herself and other current or former employees” in a law enforcement action against their employer to “seek any civil penalties the state can.”[4]  In fact, so important, strong, and immutable was this right viewed, that in 2014 the California Supreme Court in Iskanian v. CLS Transportation Los Angeles made clear that  “where … an employment [or arbitration] agreement compels the waiver of representative claims under PAGA, it is contrary to public policy and unenforceable as to a matter of state law.”[5] Little did the California Supreme Court know this holding would cause significant confusion and disagreement.

Debating Semantics: What is a PAGA Claim and What Are the Requirements of Standing?

While the Iskanian court held an employee’s categorical waiver of a PAGA claim against their employer was unlawful and unenforceable[6], what about an employee’s waiver to arbitrate part of his or her PAGA claim? What if an “aggrieved employee” or an employee who had been subjected to Labor Code violation by their employer, had entered into an agreement with that employer to arbitrate their individual PAGA claims, involving just the Labor Code violations the employer had committed against the individual employee? This would leave the court to separately handle an “aggrieved employee’s” representative PAGA claims for Labor Code violations the employer had committed against others. Would that be lawful? And, more importantly, would an “aggrieved employee” lose standing to pursue their representative PAGA claims in court if they resolved their individual PAGA claims in arbitration?

The debates over PAGA standing revolved around interpretations of its statutory text––which clearly provided that an “aggrieved employee” could assert a claim for violations of the Labor Code “on behalf of himself or herself and other current or former employees”.[7] The legislation’s use of “and” here gave support to a position that viewed the anatomy of a PAGA claim in two distinct parts. On the one hand, a PAGA claim involves “individual claims”––those asserted by a plaintiff “on behalf of himself or herself; and “representative claims”––those non-individual claims asserted “on behalf of … other current or former employees.”[8] Under this interpretation, the Iskanian court had clearly addressed one aspect of a PAGA claim––i.e., the “representative claims”––but had said nothing about the other––i.e., “individual claims”.[9] Notwithstanding this omission, many referred to PAGA’s statutory language and argued the legislators intended to create an indivisible unity between the individual and representative claims when creating the PAGA claim, and therefore, both parts were required for a plaintiff to have standing.[10]  It was believed by some an “aggrieved employee” could not be compelled by their employer to arbitrate even his or her individual claims––because by resolving these claims in arbitration, he would no longer be an “aggrieved employee” with standing to pursue his “representative claims” in court.[11]

U.S. Supreme Court Picks Its Own Side on PAGA Standing in Viking River Cruises, Inc. v. Moriana.

On June 15, 2022, the U.S. Supreme Court, in its Viking River Cruises, Inc. v. Moriana opinion, announced it had a dog in this fight over the meaning of PAGA’s statutory text and a PAGA plaintiff’s standing to pursue their individual and representative claims outside arbitration.[12] That dog was the Federal Arbitration Act[13], which guards and protects parties’ agreements to arbitrate certain matters and preempts any state law unduly interfering with such agreements.[14] In an 8-1 decision, the U.S. Supreme Court overturned the California Supreme Court’s decision in Iskanian insofar as it precluded division of an “aggrieved employee’s” PAGA claim into separable individual and nonindividual/representative claims and made clear that an employer can indeed compel an employee to arbitrate his “individual” PAGA claims.[15] Moreover, interpreting the statutory text of PAGA, the U.S. Supreme Court found that PAGA failed to provide a way for an “aggrieved employee” to maintain standing to pursue a representative claim, when their individual PAGA claim would be governed and resolved by “a separate [arbitration] proceeding”.[16]  It seemed the debate was over. The U.S. Supreme Court had laid down the law in Viking and interpreted PAGA in a way where an “aggrieved employee’s” standing to pursue his or her representative claims in court was dependent on whether or not they possessed unresolved “individual claims” or remained an “aggrieved employee” against their employer.

Yet, perhaps as a rare nod between courts, Justice Sotomayor wrote in her concurring opinion: “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” Indeed, it is “[t]he highest court of each State … [that] remains ‘the final arbiter of what is state law’”.[17]

The Last Word: California Supreme Court Clarifies PAGA Standing in Adolph v. Uber Technologies.

On July 17, 2023, in an appropriate case, Adolph v. Uber Technologies, Justice Liu of the California Supreme Court spoke his peace and had the last word.[18]  In doing so, he resolved the question of who an “aggrieved employee” is and what PAGA standing requires.

In Adolph, the California Supreme Court “consider[ed] whether an aggrieved employee who [had] been compelled to arbitrate individual claims ‘premised on Labor Code violations actually sustained by’ the plaintiff … maintains statutory standing to pursue non-individual ‘PAGA claims arising out of events involving other employees’ in court.”[19] This very issue was the one the U.S. Supreme Court had considered in Viking River, where it had concluded “a PAGA plaintiff loses standing in this situation.”[20] The California Supreme Court disagreed.

Interpreting PAGA, the Adolph court made clear the California Legislature’s intent to confer broad standing and emphasized it is the fact of an employer’s Labor Code violations against an employee which creates the “aggrieved employee” and establishes standing.[21] The court further clarified California case law and confirmed “the threshold issue of whether a plaintiff is an aggrieved employee in PAGA is not [an issue] subjected to arbitration.”[22] Moreover, once an “aggrieved employee” possessed standing, such could not later be wrestled away. Indeed, Judge Liu pointed out that allowing “post-violation events [such as arbitration] to strip an aggrieved employee of the ability to pursue a PAGA claim “would add an expiration element to the statute of standing” which the Legislature neither wrote nor intended.[23]

Based on this reasoning and in disagreement with the U.S. Supreme Court, the California Supreme Court held that “where a plaintiff has filed a PAGA action comprised of individual and non-individual or representative claims, an order compelling arbitration of the plaintiff’s individual claims does not strip them of standing to litigate non-individual claims in court.”[24] The California Supreme Court’s decision in Adolph finally brings clarity and resolution to the uncertainty and disagreements that have roiled counsels representing PAGA plaintiffs and defendants for the past decade. If we cannot agree on anything else, at least we can agree on what PAGA standing is.

Takeaways to Remember about PAGA following Adolph v. Uber Technologies:

• Employment or arbitration agreements which categorically waive an employee’s right to pursue claims under PAGA are not enforceable.[25]
• Employment or arbitration agreements which compel an employee to resolve individual PAGA claims in arbitration, are enforceable.[26]
• If a PAGA plaintiff resolves his individual PAGA claims in arbitration, they retain standing to pursue representative PAGA claims in court.[27]

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Sources

[1] See Cal. Lab. Code, § 2699(a)

[2] See Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022) cf., Adolph v. Uber Technologies, 532 P.3d 682 (2023).

[3] Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 379 (2014).

[4] ZB, N.A. v. Superior Court, 8 Cal.5th 175, 185 (2019).

[5] 59 Cal.4th 348 (2014).

[6] Id. at 379.

[7] See Cal. Lab. Code, § 2699(a)

[8] See Viking River 142 S.Ct. at 1913.

[9] See Iskanian 59 Cal.4th at 379.

[10] See Viking River 142 S.Ct. at 1925.

[11] Id.

[12] 146 S.Ct. 1906 (2022)

[13] See 9 U.S.C. § 1 et seq.

[14] Viking River 142 S.Ct. at 1912.

[15] Id. at 1924-25.

[16] Id. at 1925.

[17] See Viking River, 142 S.Ct. at 1925 (Justice Sotomayor concurring); See also Montana v. Wyoming, 563 U.S. 368, 378, fn. 5 (2011)

[18] See Adolph 532 P.3d 682 (2023).

[19] Id. at 689.

[20] See Viking River 142 S.Ct. at 1924-25

[21] See Adolph 532 P.3d. at 691

[22] Id. at 687,

[23] Id. at  690

[24] Id. at  692.

[25] See Iskanian 59 Cal.4th at 382-383.

[26] See Viking River 142 S.Ct. at 1924.

[27] See Adolph 532 P.3d at 692.