PAGA Claims are Subject to Arbitration Agreements between Employers and Employees
June 15, 2022
On June 15, 2022, the U.S. Supreme Court issued its decision on Viking River Cruises, Inc. v. Moriana (Case No. 20-1573) and held that California Private Attorneys General Act (“PAGA”) claims are subject to arbitration agreements between employers and employees. The opinion will have a significant impact on PAGA claims pursued by employees who have signed a valid agreement to arbitrate all claims on an individual basis.
PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. Employees act as “private attorneys general” and sues an employer as an agent of the State. The default penalty set by PAGA is $100 for each aggrieved employee per pay period for the “initial violation” and $200 for each aggrieved employee per pay period for each subsequent violation. PAGA claims were not allowed to be arbitrated in California.
In Viking River Cruises, Inc. v. Moriana, the plaintiff sued her former employer, Viking River Cruises, Inc., alleging various Labor Code violations on behalf of herself and other employees in a single cause of action under PAGA. Plaintiff had previously agreed to arbitrate any dispute arising out of her employment in a valid arbitration agreement that contained a “class action waiver.” Viking River Cruises, Inc. moved to compel arbitration of plaintiff’s PAGA claims and the trial court denied the motion. On appeal, the California Court of Appeal affirmed the trial court’s decision. However, the U.S. Supreme Court upheld the motion of Viking River Cruises, Inc. and held that plaintiff should have been compelled to arbitrate her individual PAGA claims.
In light of the Supreme Court’s ruling, California employers should consider reviewing their employment arbitration practices to ensure compliance.