CA Supreme Court Holds Compelling Arbitration of Individual PAGA Claim Does Not Strip Standing to Litigate Representative Claims
Yesterday, the California Supreme Court, in Adolph v. Uber Technologies, Inc., addressed the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022). The much-anticipated Adolph decision, addresses the question of whether an “aggrieved employee,” who has been compelled to arbitrate individual PAGA claims (i.e. Labor Code violations allegedly suffered by the plaintiff in an individual capacity), loses standing to pursue non-individual PAGA claims (i.e. Labor Code violations allegedly suffered by other employees) in court.
The California Supreme Court held, contrary to Viking River, that a plaintiff, who is an aggrieved employee, maintains statutory standing to pursue non-individual claims in court, even when the plaintiff’s individual claims have been compelled to arbitration. Viking River held that a plaintiff loses standing to pursue non-individual PAGA claims in court once their individual claims have been compelled to arbitration. However, Justice Sotomayor warned in her concurring opinion that “if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” The Adolph court agreed, stating that it is not bound by the United States Supreme Court’s decision, as “[t]he highest court of each State . . . remains ‘the final arbiter of what is state law.’”
In Adolph, the California Supreme Court explained that PAGA only imposes two requirements for standing: 1) that the plaintiff must allege they were employed by the alleged violator; and 2) that the plaintiff must allege they are someone against whom one or more Labor Code violations was committed. If these two requirements are met, then the plaintiff is an “aggrieved employee,” who has standing to pursue PAGA claims. The Court elaborated that “[a]rbitrating a PAGA plaintiff’s individual claim does not nullify the fact of the violation or extinguish the plaintiff’s status as an aggrieved employee.”
While Adolph initially seems to be a blow to California employers, there are some silver linings. First, the Court stated that the arbitrator’s decision as to whether plaintiff is an “aggrieved employee” would be binding on the trial court. So, if the arbitrator decides that plaintiff is an “aggrieved employee,” then plaintiff would continue to have standing to pursue non-individual claims in court. However, if the arbitrator decides plaintiff is not an “aggrieved employee,” then plaintiff would lose standing to pursue non-individual claims in court. The Court did not address what happens if a case is dismissed from arbitration without a finding as to whether or not plaintiff is an “aggrieved employee,” which remains an open question.
Second, the Court held that when the individual claims are compelled to arbitration, they are not severed from the non-individual claims. Thus, the claims in arbitration and in court are still one proceeding. While California Code of Civil Procedure section 1281.4 gives the trial court discretion to stay proceedings pending the outcome of arbitration, the fact that both the arbitrable and non-arbitrable claims constitute one proceeding suggests that the non-individual claims must be stayed pending the outcome of the individual claims in arbitration. Additionally, if the plaintiff’s standing is ultimately determined by the arbitrator’s decision, then the individual claims must necessarily be decided before the non-individual claims are adjudicated.
