The U.S. Supreme Court says Bon Voyage to the prohibition on arbitrating PAGA claims

This morning brought some good news to California employers. In a major victory, the U.S. Supreme Court held today, in Viking River Cruises, Inc. v. Moriana , that an individual’s claims under California’s Private Attorneys General Act (PAGA), the California law that authorizes “aggrieved” employees to file lawsuits against an employer on behalf of themselves and other employees and to collect civil penalties on behalf of the Labor Commissioner for an employer’s Labor Code violations, can be compelled to arbitration.

Overruling a prior California Supreme Court ruling that plaintiff’s attorneys have long relied on, the U.S. Supreme Court found that the Federal Arbitration Act preempts California law and requires that an employee who has executed an individualized arbitration agreement containing a representative action waiver provision may be compelled to arbitrate his or her individual PAGA claim, as opposed to litigating the matter in court. The Court also held that the employee’s representative claim, that is, claims brought on behalf of other employees, must be dismissed because the plaintiff-employee lacks statutory standing. However, the remaining employees may still pursue their own PAGA claims separately, subject to any arbitration agreements applicable to them.

California employers would be wise to review their arbitration agreements with their employment counsel to ensure that such agreements fully and adequately protect employers.

We will continue to monitor this matter and, as additional updates are issued, we will keep you informed.