On June 15, 2022, the U.S. Supreme Court issued its highly anticipated decision in Viking River Cruises, Inc. v. Moriana, which has been heralded as a significant victory for employers. The majority (including Alito, Sotomayor, Kagan, Breyer, and Gorsuch) held that PAGA actions are severable into individual and non-individual claims, and that individual PAGA claims can be compelled to arbitration if the agreement so provides. If that happens, then the individual loses standing to pursue non-individual PAGA claims in court, providing a basis for dismissal.
What This Means for California Employers
For the time being, Viking River Cruises may allow employers to compel individual PAGA claims to arbitration and to move to dismiss non-individual PAGA claims in court. Note, however, that an employer’s ability to do so may depend on how the arbitration agreement was drafted.
The agreement between Viking and Moriana purported to waive “representative” PAGA claims. The Court held that this agreement was invalid “insofar as it [was] interpreted in that manner.” But the severability clause in the agreement provided that if the waiver was invalid in some respect, any “portion” of the waiver that remained valid could still be “enforced in arbitration.” Based on that severability clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim. Based on this application by the Court, employers should carefully analyze PAGA waiver language and severability clauses in their arbitration agreements to ensure the language is enforceable.
What Comes Next?
Possible state court or legislative reaction: Justice Sotomayor joined in the majority opinion but filed a separate concurrence leaving room for California state courts and the California Legislature to address the standing question with respect to “non-individual” PAGA claims. We anticipate there will be future developments in this area.
Continued litigation regarding AB 51, banning mandatory arbitration in employment agreements: Issuance of the Viking River Cruises opinion is the prompt for the Ninth Circuit to consider the petition for rehearing en banc in Chamber of Commerce v. Bonta regarding AB 51, the California law that was originally set to take effect on January 1, 2020, that would prohibit employers from requiring applicants or employees, as a condition of employment, continued employment, or receipt of any employment benefit, to agree to arbitrate claims brought under FEHA or the Labor Code. Our previous coverage of the Bonta decision is here. On February 14, 2022, the Ninth Circuit issued an order stating that the Chamber of Commerce’s petition for rehearing en banc would be deferred until the U.S. Supreme Court decides Viking River Cruises. If en banc rehearing is denied, the Chamber of Commerce may petition the U.S. Supreme Court for certiorari. We will continue to monitor and report on this case, as its final disposition will have a significant impact on the risks to California employers of offering arbitration agreements to employees.