State Court Ruling Keeps Employers Open to Lawsuits

Supreme court

The California Supreme Court ruled last week that employees may take nonindividual claims to court even if a valid arbitration agreement requires their own claims to be arbitrated.

The state high court’s ruling in Adolph v. Uber Technologies, Inc. (No. S274671 (July 17, 2023)) keeps the door open for plaintiffs whose individual claims must be arbitrated to pursue nonindividual (representative) claims in court under the 2004 Private Attorneys General Act (PAGA).

PAGA authorizes “an aggrieved employee” to bring a civil action against an employer on behalf of themselves and other current or former employees, acting as a proxy or agent of the state.

More Litigation Costs

“The ruling means employers may face more litigation costs because employees still can pursue PAGA claims in court, even if a valid arbitration agreement is in place,” said Bianca Saad, CalChamber vice president of labor and employment. “It highlights the need for PAGA reform.”

The California Supreme Court decision in Adolph is a departure from last year’s U.S. Supreme Court decision in Viking River Cruises v. Moriana and severely limits the impact of the latter.

The U.S. high court said in Viking that the Federal Arbitration Act (FAA) preempts California Supreme Court case law that precluded dividing PAGA actions into individual and nonindividual claims through an arbitration agreement.

That meant an employee who entered into a valid arbitration agreement, under which the employee agreed to forgo a PAGA action in favor of arbitration, could be compelled to arbitrate their individual PAGA claims instead of taking their PAGA claims straight to court as they have done over the past several years.

While it’s still true that a plaintiff can have their individual claims compelled to arbitration, the California Supreme Court disagreed with Viking’s conclusion that such a plaintiff couldn’t pursue their representative claims.

Practical Impact

The practical effect of the Adolph decision is that the FAA and the Viking decision have no bearing on PAGA nonindividual claims. The plaintiff’s ability to now pursue civil litigation in courts will add to the time and expense of the process.

The California Chamber of Commerce and a coalition of employers are supporting a PAGA reform initiative on the 2024 ballot that will put decisions on workers’ labor claims back in the hands of the independent regulator.

For more detailed coverage of the Adolph decision, see the HRWatchdog blog post and a previous blog post about the decision’s significance.

Staff Contact: Bianca Saad

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Bianca N. Saad, a member of the CalChamber legal affairs team since April 2018, was named general counsel, labor and employment, in October 2023. Since mid-November 2021, she has been developing and leading the content and training strategy for existing and emerging products and training, as well as overseeing CalChamber associate general counsel and subject matter experts. She serves as a co-presenter for CalChamber compliance seminars and webinars. Saad brought to the CalChamber legal affairs team the perspective of an employee representative, coming from nearly eight years in private practice as an employment law and litigation attorney. She graduated with honors from the University of Miami with a B.B.A. in business management. She earned her J.D. from California Western School of Law. See full bio