The Sheriff’s Back in Town – His Name is Arbitration: The U.S. Supreme Court Agrees to Address Whether FAA Preempts PAGA

Author: Emily Meeson

Guest Editor: Grace Shuman

Related Articles: Employment, California, Arbitration, PAGA

View More: Search articles by topic

March 11, 2022 4:45pm

 

Enacted in 2004, The Labor Code’s  Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.[i]  The act has served as an avenue for plaintiffs and their counsel alike to take what would otherwise be minor violations of wage and hour laws and turn those penalties into large-value payouts – serving mostly to benefit and line the pockets of enterprising plaintiffs’ counsel.

Historically, arbitration clauses have served an effective tool for defendant employers to avoid the exorbitant costs and expenses associated with class actions.  However, much to potential plaintiffs’ benefit, in 2014 Supreme Court of California’s decision in Iskanian v. CLS Transportation Los Angeles LLC held PAGA claims are not subject to arbitration agreements, and representative action waivers are not enforceable under California law.[ii]  This takes much of the power out of these arbitration agreements and subjecting employers to onerous and tyrannical lawsuits at the hands of opportunistic Plaintiffs and their counsel.

Now, in another swing of the pendulum, the United States Supreme Court may be taking the wind out of the sails of these would-be highway robber plaintiffs by taking the following question up on certiorari: Does the Federal Arbitration Act (FAA) Preempt PAGA such that the right to bring a PAGA action can be waived by arbitration agreement?[iii]

The pioneering case, Viking River Cruises, Inc. v. Angie Moriana, centers on a cruise ship company (Viking River) and a former sales representative (Moriana).[iv]  Upon employment, Moriana signed an arbitration agreement which would apply to “any dispute arising out of or relating to [her] employment” and that “arbitration will replace going before… a court for a judge or jury trial.”[v] The agreement specifically provided that Moriana would waive class, collective, representative, and PAGA action procedures.

Upon separation of her employment, Moriana brought an action against Viking River alleging multiple wage and hour violations on behalf of herself and hundreds of similarly “aggrieved employees”. Viking River sought to enforce the arbitration agreement by filing a Motion to Compel Arbitration.

The trial court inevitably denied the motion, ruling that Moriana’s “representative PAGA claims cannot be compelled to arbitration under California law.”[vi] The Court of Appeal affirmed, citing Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that “an arbitration agreement that include[s] a waiver of an employee’s right to bring a PAGA representative action in any forum violate[s] public policy” because “a PAGA representative action is a type of qui tam action and… the state is always the real party in interest in the suit.”

After the California Supreme Court refused to hear the matter, Viking River’s counsel submitted the case to the United States Supreme Court for review, and on December 15, 2021, the Court took the matter up on certiorari.[vii] It is expected the Court will sit and hear this matter as early as Spring 2022, with a decision to handed down in Summer of 2022.

Employers can prepare for a holding in their favor by reviewing their arbitration agreements and ensuring PAGA actions are included in those agreements upon onboarding. Employers who are presently faced with a PAGA claims, and have arbitration agreements which include PAGA waivers, may wish to consider moving to compel arbitration.

Should the Court find that the FAA does, in fact, preempt California’s oppressive PAGA statute, such a holding would change the face of wage and hour litigation in California. Gone would be wild west of former employees leveraging minor violations into multimillion dollar claims, as the arbitration sheriff returns.

 

 

 

 


[i] Private Attorneys General Act (PAGA) – Filing, California Department of Industrial Relations, (Dec. 2020), https://www.dir.ca.gov/Private-Attorneys-General-Act/Private-Attorneys-General-Act.html.

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

[iii] Viking River Cruises, Inc.  v. Angie Moriana, United States Supreme Court Docket No. 20-1573

[iv] Id. Petitioner’s Brief at Pg. 12

[v] Id. at Pg. 13

[vi] Id. at Pg. 14

[vii] Viking River Cruises, Inc.  v. Angie Moriana, United States Supreme Court Docket No. 20-1573

 

Copyright © 2001–2022 Tyson & Mendes LLP. All Rights Reserved. Website by Big Behavior.