On June 15, 2022, the U.S. Supreme Court issued its long-awaited decision in Viking River Cruise, Inc. v. Moriana. It held that California employees can waive their Private Attorney General Act ("PAGA") representative standing in arbitration agreements.
As a background, PAGA authorizes aggrieved employees to recover civil penalties on behalf of themselves (individual PAGA claims), other employees (i.e., through the PAGA representative standing), and the State of California for Labor Code violations. PAGA plaintiffs act as "bounty hunters" and can receive a portion (25%) of the penalties that they "hunted" for the state. PAGA civil penalties are awarded per person per violation, per pay period, and may raise stakes to millions of dollars.
What does the Viking decision mean for employers?
- Employers should update their employment arbitration agreements to ensure their enforceability under Viking. The arbitration agreement cannot force employees to waive their PAGA claims outright. Yet, the PAGA standing can be waived. In other words, an employee can agree to arbitrate only his/her individual PAGA claims, but not the claims of other employees as a PAGA representative. While implementing the arbitration agreements, employers should also monitor the developments in U.S. Chamber of Commerce v. Bonta, which will decide the fate of California's AB51 bill banning mandatory arbitration agreements as a condition of employment.
- Employers should include severability clauses in the arbitration agreements so that if any portion of the agreement is held invalid, the remaining agreement can be enforced. Under Viking, the severability clause allowed the employer to separate the PAGA plaintiff's individual claims and send them to the arbitrator. Then, the non-individual claims that remained in the court could be dismissed because the PAGA representative has "lost" her statutory PAGA standing. Though this does not eliminate the risks of new PAGA plaintiffs, if arbitration agreements are well implemented among the employees, the PAGA risks can be avoided.