?Takeaway: The Johnson decision highlights how under a straightforward application of the Supreme Court’s Viking River ruling, properly drafted arbitration agreements are a valid and enforceable means to ensure that a plaintiff’s individual Private Attorneys General Act (PAGA) claims may be compelled to arbitration, and the nonindividual PAGA claims dismissed. However, the California Supreme Court has granted review in a case that might complicate the application of Viking River by California courts. In the meantime, employers may want to consider implementing arbitration agreements that provide the best possible provisions to ensure that individual PAGA claims are subject to arbitration and that nonindividual claims can be dismissed.
?A federal judge in the Eastern District of California issued an order compelling arbitration, on an individual basis only, of the plaintiff’s individual claims under the Private Attorneys General Act (PAGA) and dismissed the remaining representative PAGA claims.
In doing so, the court provided a straightforward application of the June decision by the U.S. Supreme Court in Viking River Cruises Inc. v. Moriana, which held that an arbitration agreement may require the arbitration of a PAGA claim on an individual basis, and then once the individual claim is compelled to arbitration, the representative PAGA claim should be dismissed for lack of standing.
The PAGA, which was enacted in 2004, enables an employee to bring an action to enforce violations of the California Labor Code suffered by the employee and on behalf of other allegedly aggrieved employees with the same employer. Prior to Viking River, California courts had held that “categorical waivers of PAGA standing” were not enforceable and that PAGA claims cannot be split into arbitrable and nonarbitrable claims.
In the Johnson case, U.S. District Judge Troy Nunley granted Lowe’s Home Centers LLC’s motion to compel arbitration for the plaintiff’s individual PAGA claim for the alleged failure to provide paid sick leave or accurate wage statements. The most relevant provisions of the arbitration agreement included the following:
- Any controversy between the plaintiff and her employer shall be settled by binding arbitration.
- The plaintiff may bring claims solely on an individual basis.
- The plaintiff cannot bring claims on a representative basis under the PAGA.
- If a court finds that the representative action waiver is unenforceable, that unenforceable waiver provision shall be severed from the agreement, but the remainder of the agreement shall be enforceable.
The plaintiff argued that her waiver was an unenforceable “wholesale waiver” of PAGA claims. The court disagreed, explaining:
The Supreme Court in Viking River recognized that PAGA actions are “representative” in two ways: “(1) PAGA actions are ‘representative’ in that they are brought by employees acting as representatives—that is, as agents or proxies—of the state”; and (2) “PAGA claims are also called ‘representative’ when they are predicated on code violations sustained by other employees.” 142 S. Ct. at 1916. The Supreme Court further explained, “when the word ‘representative’ is used in the second way, it makes sense to distinguish ‘individual’ PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out of events involving other employees.” Id. The Supreme Court stated, “Iskanian‘s principal rule prohibits waivers of ‘representative’ PAGA claims in the first sense. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum.” Id. The Supreme Court found that Iskanian‘s principal rule “is not pre-empted by the FAA” [Federal Arbitration Act] and thus provisions that constitute “wholesale waivers of PAGA claims” under that rule are invalid. Id. at 1924-25.
As such, Judge Nunley concluded the plaintiff’s waiver is not an invalid “wholesale waiver” because it does not deny the plaintiff the right to bring a PAGA claim for violations that she suffered as an individual. Instead, the plaintiff’s waiver is an enforceable waiver that provides that “the employee may not seek relief on behalf of any other parties in arbitration, including but not limited to similar aggrieved employees.”
The court also found that the plaintiff’s severability provision was “similar enough” to the corresponding provision at issue in Viking River to “warrant the same result,” the enforcement of the arbitration agreement to send her individual PAGA claims to arbitration. As such, the court compelled the plaintiff’s individual PAGA claim to arbitration.
Finally, the court provided a straightforward application of Viking River to conclude that once the plaintiff’s individual PAGA claims were compelled to arbitration, her nonindividual PAGA claims should be dismissed.
Johnson v. Lowe’s Home Centers LLC, E.D. Calif. (Sept. 21, 2022).
Michael Nader is an attorney with Ogletree Deakins in Sacramento, Calif. He co-chairs the firm’s California Class Action and Private Attorneys General Act practice. Zachary Zagger is senior marketing counsel with Ogletree Deakins in New York City.
