U.S. SUPREME COURT TO DECIDE WHETHER ARBITRATION AGREEMENTS PROHIBIT PAGA ACTIONS
On December 15, 2021, the United States Supreme Court granted certiorari in Viking River Cruises, Inc. v. Moriano, in which it will decide whether the Federal Arbitration Act (“FAA”) requires enforcement of bilateral arbitration agreements that prohibit representative actions, including under the California Private Attorneys General Act (“PAGA”). If the Court rules in favor of Viking River, the decision will breathe new life into the utility of employment arbitration agreements and dramatically reduce the number of costly PAGA actions California employers face.
Employers often use arbitration agreements for the purposes of providing a quicker, less costly, and more efficient process for the resolution of disputes outside of the courts. Employers often utilize class or collective action waivers in the arbitration agreements, which require that employees pursue arbitration on their own behalf rather than on behalf of a class, collective, or other representative basis.
Since 2014, however, employers have been unable to use arbitration agreements to prevent representative actions under PAGA. In Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), the California Supreme Court held that waivers of an employee’s right to pursue a PAGA claim violated California public policy and are unenforceable. The California Supreme Court reasoned that the FAA did not preempt California’s rule because a PAGA action is not a dispute between an employer and an employee – the parties to the arbitration agreement – but instead, a dispute between the employer and the State of California, with the employee merely serving as the State’s proxy. The Iskanian decision found further support a year later, when the United States Court of Appeals for the Ninth Circuit issued a similar ruling in Sakkab v. Luxottica Retail North America, 803 F.3d 425 (9th Cir. 2015).
In the current case, Angie Moriana filed a PAGA action against Viking River in California state court alleging violations of the Labor Law. Viking River moved to compel individual arbitration, notwithstanding the Iskanian and Sakkab rulings. The trial court denied the motion, the California Court of Appeal affirmed the ruling, and the California Supreme Court denied Viking River’s petition for review. Viking River then petitioned the United States Supreme Court for certiorari. Viking River argues that the Court’s tandem decisions in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) and Epic Systems Corp. v. Lewis, 138 S.Ct. 612 (2018), which together hold that arbitration agreements must be enforced according to their terms, including terms that prohibit class or collective arbitrations, should apply to representative actions, like PAGA claims, as well.
The implications of a ruling in Viking River’s favor cannot be understated: California employers may have a path to avoid often frivolous and potentially ruinous PAGA actions. A decision in the case is expected in Summer 2022. California employers should keep a close eye on this case and be prepared to swiftly update their arbitration agreements in consultation with qualified labor and employment counsel.To read more articles like this one, subscribe to the ALERT Newsletter today!
About The Author
Brian D. Murphy is a partner with Sheppard, Mullin, Richter & Hampton LLP in the firm's New York office. Mr. Murphy is an employment defense litigator defending management in all areas of employment law, with a particular focus on wage and hour class and collective action litigation under Rule 23 and the Fair Labor Standards Act, and class claims under the Fair Credit Reporting Act. In addition to defense litigation, Brian also provides counsel and advice to employers concerning workplace investigation of claims of discrimination, harassment, and retaliation, restrictive covenants, employment contracts, personnel policies, and reductions-in-force. Brian also develops training programs and conducts trainings for clients concerning appropriate workplace behavior and wage and hour compliance.
Mr. Murphy has written extensively throughout his career on a number of employment topics and has been published in the New York Law Journal, the National Law Journal, Law360, and Corporate Counsel. He is also the co-author of the Wage and Hour Manual for New York Employers.