For well over a decade the United States Supreme Court (“SCOTUS”) has approved of employment arbitration provisions. In 2018 in Epic Systems Corp. v. Lewis, SCOTUS approved a class action waiver contained in an arbitration agreement.
In spite of the positive treatment of employment arbitration agreements by SCOTUS, California has shown repeated hostility for these agreements. For example, Labor Code § 229 states that lawsuits to enforce provisions of wage and hour laws may be maintained even though an arbitration agreement exists. Moreover, in 2020 Labor Code § 432.6 was enacted that prevented an employer from requiring an applicant or employee from signing an arbitration agreement in order to obtain a job or other employment benefit. A federal district court issued an injunction blocking the enforceability of this provision. In Chamber of Commerce v. Bonta, the Ninth Circuit reversed the district court’s ruling.
Finally, the California courts have routinely held that PAGA lawsuits are not subject to arbitration agreements signed by an employee. PAGA is a lawsuit seeking civil penalties for Labor Code violations. The State of California has deputized employees to file PAGA lawsuits for themselves and for co-workers.
In June of 2022, in Viking River Cruises, Inc. v. Moriana, SCOTUS held that an employee’s personal PAGA claims are subject to an arbitration agreement. And because PAGA requires a lawuit to be adjudicated in a single proceeding, if the lead employee’s personal PAGA claims are compelled to arbitration, that employee does not have standing to prosecute the PAGA claims of co-workers in a civil lawsuit. As a result, the PAGA claims of co-workers must be dismissed.
We anticipate the California Legislature will take action to modify PAGA permitting PAGA claims of co-workers to continue. It appears that the California Supreme Court may also issue an opinion on the issue of the arbitrability of PAGA claims. On July 20, 2022, the court granted review in Adolph v. Uber Technologies, Inc., to address whether an aggrieved employee who has been compelled to arbitrate his personal claims under PAGA maintains standing to pursue the PAGA claims of co-workers.
And in another surprise, the Ninth Circuit has issued an order withdrawing its opinion in the Chamber of Commerce case. Could the Ninth Circuit invalidate Labor Code § 432.6 preventing employers from requiring employees to sign an arbitration agreement while the California Supreme Court permits an employee with a valid arbitration agreement to continue prosecuting the PAGA claims of co-workers in court while (s)he pursues individual PAGA claims in arbitration? This result would not surprise me.
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Do you need help navigating the laws relating to employment arbitration agreements? We are pleased to work with clients who want to implement or revise their arbitration agreements or adopt other policies and procedures to strengthen their ability to respond successfully to employee litigation.