US Supreme Court Permits Arbitration of Individual PAGA Claims

In a favorable opinion for California employers, the US Supreme Court, in Viking River Cruises v. Moriana, held employees may be compelled to submit individual Private Attorney General Act (PAGA) claims to binding arbitration (thereby waiving their rights to a jury trial).
By way of background, PAGA permits an “aggrieved” employee who allegedly had their Labor Code rights violated, to step into the shoes of the state Labor Commissioner and enforce certain violations of California labor law. PAGA allows for civil penalties against employers on behalf of the state. Further, only an individual employee brings a claim under PAGA, while other allegedly “aggrieved” employees do not participate in the lawsuit. The default PAGA civil penalty is $100 per employee per pay period for an initial violation and $200 per pay period for subsequent violations.
Prior to Viking River Cruises, PAGA claims could not be compelled into arbitration. In those cases in which an employee was bound by an arbitration agreement, the lawsuit would be split, with non-PAGA claims submitted to arbitration first and PAGA claims decided after the arbitration was completed, essentially subjecting the employer to multiple trials and no benefit of arbitration of PAGA claims.
A second important thrust of Viking River Cruises is that, because an employee bound to arbitrate her PAGA claims lacks standing to prosecute claims on behalf of other similarly “aggrieved” employees, the remaining PAGA claims must be dismissed upon submission of the case to arbitration.
It is important to remember that, based on the current status of California’s Assembly Bill (AB) 51, it remains unclear whether an employer can require a new hire to sign an arbitration agreement as a condition of employment. It remains to be seen how the Supreme Court will address this issue. At this time, it is safest to make an agreement to arbitrate employment claims voluntary.
Additionally, it is critical to understand both the costs and benefits of binding arbitration of employment claims in California, as employers are required to shoulder 100% of the arbitration fees, which can be quite substantial. Employers contemplating adopting an arbitration policy or who wish to fully understand the costs vs. benefits of employment arbitration, should contact us for further information.

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