Viking River Cruises v Moriana:Supreme Court Hands Temporary Win to Employer's Challenge to California PAGA Actions.
Acknowledging that the State’s Labor and Workforce Development Agency (LWDA) lacked sufficient staff and resources to enforce California’s Labor Code, the California Legislature enacted the Private Attorneys General Act (PAGA), Cal. Lab. Code § 2698, which empowers a victim of Labor Code violations to sue her/his employer on behalf of other employees whose Labor Code rights were violated by the same employer. In this regard, PAGA allows unrelated Labor Code violations claims to be brought in the same suit under the name of a representative PAGA plaintiff, regardless of whether the named plaintiff suffered those violations.
On June 15, 2022, the United States Supreme Court issued its highly anticipated decision in Viking River Cruises, Inc. v Moriana concerning whether the Federal Arbitration Act (FAA) preempts California’s wholesale prohibition of PAGA action waivers in arbitration agreements. In Viking River Cruise, Moriana, a former Viking employee, brought a PAGA action against Viking for her individual Labor Code violation as well as numerous unrelated Labor Code violations she alleged Viking committed against other employees. Pursuant to the terms of a mandatory arbitration agreement between Moriana and Viking that waived Moriana’s right to pursue a representative PAGA action in court, Viking moved to compel Moriana to arbitrate her individual PAGA claim and to dismiss the representative PAGA action (those violations suffered by other employees). Applying the holding in Iskanian v. CLS Transp. Los Angeles, LLC , the California courts rejected Viking’s position and held that categorical waivers of PAGA standing is contrary to public policy and that PAGA actions cannot be “split” between arbitrable individual PAGA actions and non-arbitrable representative actions.
In reversing the California Court of Appeal, the majority opinion, penned by Justice Alito, concluded that a wholesale waiver of PAGA actions is not preempted by the Federal Arbitration Act (FAA), but that the FAA preempts the California rule precluding splitting PAGA actions between individual arbitrable and representative non-arbitrable claims. Viking River Cruise hands a temporary victory to employers using arbitration agreements that waive PAGA actions because PAGA plaintiffs will be forced into arbitration and their Labor Code claims will be limited to the violations she or he personally suffered. As such, employees will be dissuaded from pursuing them. The majority opinion, however, left open the door for the California Legislature to amend PAGA to give standing to individual plaintiffs to pursue representational claims in court, standing that the Court found lacking under PAGA’s current statutory language. See Justice Sotomayor’s concurring opinion providing this amendment roadmap.
Although employers are claiming a win, the majority opinion repeatedly acknowledges that the FAA is rooted in the principle that “arbitration is strictly a matter of consent” of the parties. The opinion stresses that the FAA would lose its legitimacy if only one party wanted to arbitrate and the other party had no choice but to submit. This gives us some hope that California’s recently enacted ban on mandatory arbitration agreements as a condition of employment (Labor Code § 432.6) just might survive current legal challenges working their way through the courts. Stay tuned.