National Law Review

Cruising to Arbitration

Employers obtained some excellent news concerning Personal Attorneys’ Normal Act (PAGA) instances because the U.S. Supreme Court docket held that particular person PAGA claims may be arbitrated pursuant to a legitimate arbitration settlement.  In Viking River Cruises v. Moriana, No. 20-15735, 596 U.S. __ (2022), eight of the 9 justices rejected the California Supreme Court docket-created rule in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), that prohibited arbitration of an worker’s particular person PAGA claims and solely permitted PAGA claims to be litigated in court docket on behalf of different aggrieved workers (“representative actions”). 

Details of Viking River Cruises

In Viking River Cruises, plaintiff Angie Moriana signed an arbitration settlement when she was employed as a gross sales consultant for Viking River Cruises.  She agreed to arbitrate any claims arising out of her employment that she might have towards the corporate and agreed to a “class action waiver” that she wouldn’t convey any claims on a category, collective or consultant foundation in any arbitral continuing.  The arbitration settlement contained a severability clause specifying that if any portion of the category motion waiver was discovered to be invalid, the claims can be litigated in court docket.  If any portion of the waiver remained legitimate, it could be litigated in arbitration.  

After her termination, Moriana filed a consultant PAGA motion on behalf of herself and different aggrieved workers in a California court docket.  Viking River Cruises moved to compel arbitration of Moriana’s particular person PAGA claims and sought to dismiss the remaining PAGA claims introduced on behalf of different aggrieved workers.  The trial court docket denied the movement primarily based on Iskanian, and the Court docket of Enchantment affirmed.

The U.S. Supreme Court docket reversed, holding that the Federal Arbitration Act (FAA) preempted Iskanian to the extent that Iskanian prohibited events from arbitrating the plaintiff’s particular person PAGA claims.  The Court docket reasoned that prohibiting the division of PAGA claims into particular person and non-individual (or consultant) claims allowed a celebration to an arbitration settlement to increase the scope of points past the events’ unique settlement.  Such pressured procedural growth of the arbitration settlement by the state “unduly circumscribes the freedom of parties to determine the ‘issues subject to arbitration’ and ‘the rules by which they will arbitrate,’” thus violating the “fundamental principle that ‘arbitration is a matter of consent.’”  

So What Occurs to the Claims Introduced on Behalf of Different Aggrieved Staff?

The Court docket went a step additional to focus on the standing of the remaining claims introduced on behalf of different aggrieved workers.  The Court docket famous that, underneath its studying of the PAGA statute, Moriana would not have standing to pursue the non-individual PAGA claims, as a result of PAGA offered no mechanism to allow a court docket to adjudicate non-individual PAGA claims when the person PAGA claims have been in arbitration.  As a result of her particular person PAGA claims have been pared away from the judicial PAGA motion, Moriana was no completely different than a member of most of the people, and PAGA didn’t permit such individuals to preserve swimsuit.  Given this standing challenge, the Court docket famous that the proper course can be to dismiss the non-individual claims.

What Occurs Now?

On account of Viking River Cruises, employers with legitimate arbitration agreements waiving consultant claims and allowing particular person arbitration of PAGA claims might now get pleasure from a reprieve from consultant PAGA claims, however that is unlikely to be the top of the story.  As Justice Sotomayor succinctly mentioned in her concurrence, a state court docket might interpret PAGA’s standing necessities in a different way or the California legislature might draft a legislative “fix” for the standing downside created by the person arbitration of a plaintiff’s claims. 

  • We suggest that employers evaluation their present arbitration agreements to decide what claims are lined or excluded from arbitration.  Because the U.S. Supreme Court docket discovered, an entire ban on bringing a consultant or particular person PAGA declare would nonetheless be invalid underneath Iskanian.  

  • Employers ought to establish potential modifications which may be warranted however take into account that the Ninth Circuit’s Chamber of Commerce v. Bonta choice might create limitations to rolling out necessary arbitration agreements as a situation of employment.   

  • Employers additionally ought to hold a detailed eye on legislative or California appellate court docket exercise regarding PAGA standing.  Judicial or legislative motion might make this victory for California employers a fleeting one.  The California legislature or judiciary is free to modify standing underneath PAGA.  

  • Lastly, employers dealing with consultant PAGA actions in court docket ought to consider whether or not the plaintiff’s particular person claims is likely to be topic to arbitration and transfer to compel particular person arbitration and dismiss the consultant motion.

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