U.S. Supreme Court Ruling on PAGA

On June 15, 2022, in the matter of Viking River Cruises, Inc v. Moriana, (“Moriana”) the U.S. Supreme Court determined that the Federal Arbitration Act (FAA) preempts the invalidation of contractual waivers to assert representative claims under the California Private Attorneys General Act of 2004 (PAGA). While the prohibition of complete waivers of PAGA claims is not preempted by the FAA, the PAGA rule of claim joinder, which allows a party to unite multiple claims against an opposing party in a single action, is preempted under the FAA.

In Moriana, the plaintiff filed a PAGA claim alleging various labor code violations. Plaintiff had signed an arbitration agreement with Viking, in which she agreed to arbitrate individual PAGA claims but waived the right to bring representative PAGA claims (“Class Action Waiver”). Viking moved to compel arbitration and dismiss her PAGA claims and the California courts ruled against the former employer. The Supreme Court found that a state law imposing an expansive joinder rule in arbitration defeats the ability for parties to control which claims are arbitrated under the FAA and that Viking was entitled to compel arbitration of Moriana’s individual PAGA claim. As a result, plaintiff’s representative claims were dismissed.

What This Means for PAGA:

• Parties can decide what issues they want to arbitrate on.
• PAGA’s built-in claim joinder rule conflicts with the FAA.
• If an employee has signed an arbitration agreement, the waiver must be upheld in PAGA claims.
• However, employees that have signed such an agreement can still bring claims to court under PAGA as a part of a class of workers.

As the press releases were being written, California Legislators were already discussing potential legislative proposals to ‘fix’ the law. The Legislative Session doesn’t adjourn until August 31, which gives more than enough time for the majority party to pass legislation. Stay tuned. View Update