The United States Supreme Court Ruling in Viking River Cruises, Inc. v. Moriana impacts California PAGA litigation
Introduction to PAGA
The Labor Code Private Attorneys General Act (“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. PAGA afforded employees in California the right to file lawsuits against employers who violated the California Labor Code. PAGA authorized wronged employees to file lawsuits to recover civil penalties on behalf of either themselves, other employees, or the state of California. In effect, PAGA granted employees the right to sue as a representative of the California Labor and Workforce Development Agency (“LWDA”).
Today, many employers require their employees to sign arbitration agreements that prevent them from initiating class or representative lawsuits. However, under the now previous California law, arbitration agreements cannot waive an employee’s rights to bring legal action under a PAGA claim. To learn more, “check out our article on PAGA”
How the Supreme Court’s Decision on Viking River Cruises, Inc. v. Moriana will affect PAGA, the quick read
On June 15, 2022, The U.S. Supreme Court ruled on Viking River Cruises, Inc. v. Moriana 8-1 in favor of Viking River Cruises (“Viking”), overturning the decisions of the lower courts of California. The United States Supreme Court held that the Federal Arbitration Act (“FAA”) preempts PAGA in part. That partial victory, in this setting, was a major win for California employers because, as a practical matter, it makes the waiver of representative PAGA claims – not individual PAGA claims – in employment arbitration clauses enforceable in California—at least for now.
The Supreme Court first rejected Viking River’s argument that the FAA categorically preempts all PAGA claims. Only “the changes brought about by the shift from bilateral arbitration to class-action arbitration are too fundamental to be imposed on parties without their consent.” Basically, individual PAGA claims can still exist.
The Supreme Court then ruled that PAGA does conflict with the FAA to the extent it permits the joinder of claims of other aggrieved employees unrelated to the PAGA plaintiff’s own claim and precludes individual arbitration of a plaintiff’s claims. Many PAGA claims are expanded to include all aggrieved employees within the statute of limitations creating exponential exposure to the defendant employer, as one PAGA representative suddenly represents thousands of aggrieved employees. The Supreme Court held this joinder of other employees’ claims forced parties to arbitrate claims they did not jointly agree to arbitrate.
What has happened in Viking River Cruises, Inc. v. Moriana? The long read
From 2016 to 2017, Angie Moriana worked for Viking as a sales representative. Viking is a company that sells cruise ship trips on ocean and river cruise lines. At the start of her employment, Moriana was required to sign an arbitration agreement, which waived her right to assert a class, collective (under the Fair Labors Standards Act [“FLSA”]) or representative (PAGA) actions.
During Moriana’s employment, she and other sales representatives were subjected to numerous violations of California’s Labor Code. At the end of her employment, Moriana brought suit against Viking in California state court under PAGA.
The trial court denied Viking’s motion to compel for arbitration and subsequently ruled in favor of Moriana, citing Iskanian v. CLS Transportation Los Angeles, LLC which held that arbitration agreements waive the right to bring PAGA representative actions in any forum are unenforceable. On appeal, the court of appeal affirmed the trial court’s decision, denying Viking’s motion to compel.
On March 30, 2022 the U.S. Supreme Court heard oral arguments and began deliberation, ultimately deciding in favor of Viking River on June 22, 2022.
What Viking Argued
Viking asserted that the enforcement of arbitration agreements falls under the Federal Arbitration Act which gave employers the power to have employees agree to arbitration and waive their right to bring a class action against his or her employer. In part, Viking contended that the FAA governed the resolution of private affairs while PAGA actions governed disputes between an employer and the state. Viking reasoned that PAGA claims actually generated private, individual claims and should fall under the FAA’s umbrella.
Further, Viking argued that PAGA claims operated in a similar fashion to other collective actions, allowing a plaintiff to pursue claims in the interest of other people, as such the PAGA actions should not be treated differently from other collective actions. Thus, Viking contended that PAGA claims should adhere to federal procedural rules and allow for arbitration agreements.
The United States Supreme Court’s Holding
In what was expected to be a very close 5-4 decision, the Court ruled 8-1 in favor of Viking River. In its ruling, the Court issued two, almost contradictory, holdings:
- The prohibition of wholesale waivers of PAGA claims, as held in Iskanian, is not preempted by the FAA.
- The FAA preempts the previous ruling in Iskanian that PAGA cannot be divided into individual and non-individual claims.
What the Viking River Cruises, Inc. v. Moriana decision means for PAGA claimants for now and retroactively
The main issue of this case was whether the FAA will preempt PAGA and require state courts to enforce arbitration agreements specifying that employees cannot initiate representative claims.
In the Court’s decision, PAGA claims are seen as a procedural mechanism, rather than substantive, and fall under the FAA’s umbrella, acting similarly to a class action claim.
Under the Court’s decision, employers can now build into and enforce arbitration agreements that prevent employees from filing PAGA claims that can be brought collectively. As such, employers have been given the ability to limit the legal remedies of an employee and limit the cost and time it would take to litigate in court. In essence, this decision put a stranglehold on employee representative suits.
In the immediate future, this can be seen as a win for employers. Companies, such as Uber and Postmates, who have already come out in support of Viking, will now have the precedent to limit their own exposure in class action suits.
However, the Supreme Court’s decision is far from the last word we will hear about PAGA claims in California. In Justice Sotomayor’s concurring opinion, she comments that “California courts…will have the last word” indicating that the state will have final say on the future of PAGA claims.
In the coming weeks, it is expected that the state will propose new legislation to enforce PAGA claims against arbitration clauses on conferring standing on the PAGA representative that will essentially gut the decision. Legislation is being proposed that may be signed as soon as October 2022. The war is far from over, but for now, employers can relish in their victory of the first battle, but know “winter is coming,” and this is not the last battle.
If you have any questions about this article, PAGA Amendments, or have issues with unpaid wages, commissions, company charges to your wages, business expenses, off-the-clock work, or any issues with your pay at your current or former employer, please feel free to contact:
Richard E. Quintilone II, Esq. or Jeffrey T. Green, Esq.
Quintilone & Associates
22974 El Toro Road, Suite 100
Lake Forest CA 92630
Phone 949-458-9675
Email [email protected]; or Email [email protected] web www.quintlaw.com
This post was drafted with the assistance of Law Clerk Zachary Zolowicz [email protected]
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