California’s Supreme Court is set to address whether workers compelled to arbitrate issues with their employers can still represent their peers in enforcement suits filed under the state’s unique Private Attorneys General Act.
The long-running fight pitting
California’s 20-year-old PAGA deputizes workers to sue on the state’s behalf for labor law violations. Any recoveries under the statute for violations such as failing to pay overtime is split 75-25, with the state Labor and Workforce Development Agency getting the bulk of the funds.
Employers deride the act as a bounty to enrich plaintiffs’ attorneys.
The US Supreme Court last June, ruling in a case involving Viking River Cruises Inc., said such suing workers must arbitrate their individual claims if they’ve already pledged to do so. It returned to California that case, plus six others: two against Uber, and one each against
‘Bad Law and Bad Policy’
A plain reading of the law and Viking River means California’s high court should reject Erik Adolph’s interpretation that he can continue litigating on behalf of Uber drivers, attorneys for Uber told the court in a pre-argument brief.
“Adolph’s interpretation of PAGA is bad law and bad policy. But if there is any merit to his argument that effective deterrence requires actions by plaintiffs with only a superficial connection to the claims, only the Legislature could rework PAGA standing in that fundamental way,” Uber said then.
Adolph’s attorneys contend that under California law, standing to assert a statutory claim, whether under PAGA or otherwise, turns exclusively upon the language and purpose of the statute.
“PAGA’s text makes clear that a plaintiff seeking to pursue civil penalties on behalf of the California Labor and Workforce Development Agency need only allege that she is an ‘aggrieved employee,’ which the statute defines to mean ‘any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed,’” the drivers’ side brief said.
“Adolph’s operative complaint expressly pleaded the only two facts required for PAGA standing: that he was an ‘employee’ and that he was ‘aggrieved,’” his lawyers said. Even if their arbitration agreement required Adolph to pursue PAGA’s statutory remedy in two forums, Adolph still had standing as an aggrieved employee to pursue those separate remedies in each forum, they said.
Side Three, the State
California Attorney General Rob Bonta’s office said PAGA was “born out of a period of serious under-enforcement of the Labor Code that was disproportionately affecting some of the State’s most vulnerable workers.”
“Nothing in PAGA’s text and statutory context suggests that statutory standing is lost if an aggrieved employee’s individual PAGA claims are sent to arbitration,” Bonta’s friend of the court brief said.
Five published appellate decisions have sided with the state’s interpretation that workers continue to have a dog in the fight even when their claims must be arbitrated. Few expect the California Supreme Court to change the law after the court’s 2014 ruling in Iskanian v. CLS Transp. L.A., LLC.
In that case, the state high court ruled that PAGA “representative” claims on behalf of the state and other workers couldn’t be waived in favor of arbitration.
“I would be very surprised if the California Supreme Court chose to eviscerate the PAGA statute,” said Lauren Teukolsky, founder of Teukolsky Law in Pasadena, Calif.
“And if they agree with Uber’s position, PAGA would be eviscerated because companies would be able to send individual PAGA claims to arbitration and have the remainder of the PAGA claims, the claims on behalf of others, dismissed,” Teukolsky said. “It is entirely contrary to the stated purpose of PAGA, which is to encourage private attorneys to augment the state’s ability to enforce the labor code.”
Money Issues
The pro-business Californians for Fair Pay and Employer Accountability, whose members include the California Chamber of Commerce, California New Car Dealers Association, Western Growers Association, is backing Uber.
“PAGA has often been used as a tool to shake down businesses and obtain massive attorney fee awards, rather than to ensure Labor Code compliance,” the group said in a friend of the court brief. “In fact, plaintiffs’ attorneys have coupled PAGA actions with non-PAGA claims in order to drive settlements that are characterized to decrease the amount attributable to penalties and increase the amount attributable to claims paid solely to the plaintiff (and not the State).”
The US Chamber of Commerce also maintains that allowing “headless PAGA lawsuits would exacerbate the harms already caused by plaintiffs’ lawyers who have weaponized PAGA claims.” The California Chamber of Commerce said PAGA settlements have cost California employers $8 billion over the last six years.
PAGA has helped recover millions of dollars in egregious cases involving agricultural workers, counters the California Rural Legal Assistance Foundation.
A decision finding employees lose standing to bring non-individual PAGA claims when signing an arbitration agreement “would likely prompt another surge in arbitration agreements waiving employees’ right to serve as a proxy,” their brief said.
Searching for Clarity
However the court rules in a decision expected by early August, the battle will turn to the ballot box where a 2024 business-backed PAGA reform initiative is before California voters. The initiative, if passed, would shift to the Labor Commissioner the power to enforce penalties.
Until then, dozens of cases are stayed pending the court’s ruling in Adolph.
“The law’s always evolving its own kind of representative action, which has no real equivalent anywhere else in the country. So, I think it is very hard to get clear lines on these issues because they are always continuing to move and evolve,” said Phillip Ebsworth, a Seyfarth Shaw LLP associate in Sacramento, Calif.
The actual issue presented to the court isn’t likely to make a difference in how trial courts are handling cases, he said. “The bigger issue is what the Supreme Court touches on other issues affecting how these kinds of cases are litigated or how these cases are prosecuted and how they defend them. It comes down very much to what else is in the opinion.
“I think regardless of when we get a new decision or new ballot measure or an amendment to PAGA, it just creates other questions and other lines that are blurry,” Ebsworth said.
Littler Mendelson PC and Gibson Dunn & Crutcher LLP represent Uber. Desai Law Firm PC, Altshuler Berzon LLP, and Goldstein, Borgen, Dardarian & Ho represent Adolph.
The case is Adolph v. Uber Techs., Inc., Cal., No. S274671, oral arguments 5/9/23.
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