Litigation Trends Analysis

Can PAGA Claims Get a Second Life Post-Viking River Cruises?

If you are a national business—or these days, a business of any size—with operations in California, you are likely familiar with the California Private Attorneys General Act (“PAGA”).  PAGA claims are rampant these days, but a new trend in the case law will either drastically decrease—or potentially increase—the risk they pose to employers.

Passed in 2004, PAGA allows individual employees to bring actions on behalf of the state when they allege violations of California labor laws.  PAGA was a reaction to a perceived lack of enforcement of and compliance with California’s complex labor laws.  Employees were able to seek penalties that previously were only available to the California Department of Industrial Relations (the “DIR”).  Under PAGA, employees keep twenty-five percent of the penalties and the DIR receives the rest.  The plaintiffs’ attorneys can obtain an award of their fees and costs.  This created a massive incentive for the plaintiffs’ bar to seek out current and former employees as clients, and the number of PAGA lawsuits filed has increased dramatically—especially after the California Supreme Court decided, in Iskanian v. CLS Transportation, that pre-dispute employment arbitration agreements could not waive the right to bring representative PAGA claims under California law.

However, last year, the U.S. Supreme Court overruled Iskanian.  In Viking River Cruises v. Moriana, the High Court ruled that the Federal Arbitration Act (“FAA”) controlled over PAGA and the California Supreme Court’s decision in Iskanian.  According to the U.S. Supreme Court, if an employee agreed to arbitrate the individual component of their PAGA claim, such arbitration should be compelled.  At the same time, PAGA plaintiffs would not have standing to continue pursuing the non-individual components of their PAGA claims.  The Viking River Cruises decision was seen as a win for employers and a blow to the plaintiffs’ bar.

Nonetheless, the California courts have not been silent in the wake of Viking River Cruise.  A recent California state court case has proceeded to the California Supreme Court that might result in a functional overturning of the Supreme Court’s Viking River Cruises decision.  In Adolph v. Uber Technologies Inc., an employee whose individual claim was compelled to arbitration has attempted to maintain the PAGA action arising out of the claims of the other employees the plaintiff contended to represent.

Since then, trial courts have faced a decision on what to do with the non-individual components of PAGA actions.  The majority of California state courts are simply staying the non-individual actions while arbitration on the individual claims takes place – waiting on the California high court to render a decision.  Conversely, some federal courts, including the Northern District of California (see Callahan v. Paychex N. Am. Inc., No. 21-CV-05670-CRB, 2022 WL 11902205 (N.D. Cal. Oct. 20, 2022)), the Eastern District of California (see Johnson v. Lowe's Home Centers, LLC, No. 221CV00087TLNJDP, 2022 WL 4387796 (E.D. Cal. Sept. 22, 2022)), and the Middle District of Georgia (see Am. Fam. Life Assurance Co. of Columbus v. Hesselink, No. 4:22-CV-00130-CDL, 2022 WL 9544311 (M.D. Ga. Oct. 14, 2022)), have compelled individual arbitration and dismissed the remainder of the action.  The California Supreme Court’s upcoming Uber Technologies decision could upset the Viking River Cruises decision or support it—either way, it will shed light on how future actions will be handled (at least until one of the parties in Uber Technologies appeals the decision to the U.S. Supreme Court).

PAGA claims have been a cost of doing business in California for almost two decades.  Employers may see a light at the end of the tunnel as a result of Viking River Cruises, or PAGA may see a second life breathed into it.  Either way, savvy employers will keep a close eye on this developing trend.  When employers receive notice of a PAGA claim, they should contact experienced counsel to evaluate the nuances and determine the best strategy possible given the particular situation (and the best forum to execute that strategy).

If you have questions about this or any other workforce issue, please contact your relationship attorney or Honigman’s Labor & Employment team.  

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