U.S. Supreme Court Holds That The Federal Arbitration Act Preempts California’s Rule Prohibiting Contractual Arbitration of Individual PAGA Claims

On June 15, 2022, the U.S. Supreme Court issued its extremely anticipated opinion in Viking River Cruises, Inc. v. Moriana, which thought-about whether or not or not claims introduced underneath the California Non-public Attorneys Common Act (“PAGA”) may be waived by an arbitration settlement. Present case regulation in California held that PAGA claims couldn’t be waived by way of an arbitration settlement as a result of these claims are introduced on behalf of the state. The defendant in Viking River Cruises challenged this California rule on the grounds that it was preempted by the Federal Arbitration Act (“FAA”).

The Court’s nuanced opinion in Viking River Cruises delivers excellent news to California employers who use arbitration agreements with their staff insofar because the Court dominated that the FAA preempts California’s rule that PAGA actions can’t be divided into particular person and consultant claims. Thus, whereas the Court stopped brief of invalidating California’s rule stopping wholesale waivers of PAGA claims by way of an arbitration settlement, the Court held that an enforceable arbitration settlement can mandate arbitration of particular person PAGA claims. Due to this fact, within the case at challenge, the Court dominated that the named PAGA consultant’s particular person PAGA claims have been topic to an arbitration settlement she had signed along with her employer. Though the arbitration settlement included a waiver of class, collective or consultant PAGA actions, it additionally included a severability provision specifying that if the waiver was discovered invalid, such a dispute can be litigated in courtroom, and any portion of the waiver that remained legitimate can be enforced in arbitration. Consequently of having to arbitrate her particular person PAGA claims, the Court additional held that the named PAGA consultant, subsequently, lacked statutory standing to keep up her consultant PAGA claims in courtroom, and that these claims have to be dismissed.

Whereas the exact implications of the Viking River Cruises case will doubtless be refined by means of additional litigation, the Court’s opinion represents a good shift within the regulation for California employers who can now compel arbitration of an worker’s particular person claims the place that worker has signed an enforceable arbitration settlement that covers such claims, and search dismissal of any associated consultant PAGA motion for lack of standing. Moreover, following the Supreme Court’s determination in Viking River Cruises, the Ninth Circuit is ready to contemplate a Petition for Rehearing en banc in one other case, Chamber of Commerce of United States v. Bonta, which offers with the enforceability of AB 51, a brand new California regulation prohibiting obligatory arbitration agreements as a situation of employment which has been stayed pending the Court’s determination in Viking River Cruises.

In gentle of the Viking River Cruises determination, employers will wish to instantly assessment their arbitration agreements to guage whether or not they’re successfully written to cowl particular person PAGA claims and keep away from wholesale waivers of PAGA claims. 

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