United States: California Supreme Court Rejects Part Of Viking River: Is It Time To Update Your Arbitration Agreement (Again)?

In June 2022, the Supreme Court of the United States ruled in Viking River Cruises, Inc. v. Moriana that (1) the Federal Arbitration Act (FAA) requires the enforcement of an arbitration agreement that waives an employee's right to bring individual claims through California's Private Attorneys General Act (PAGA), and (2) named plaintiffs lack standing to pursue non-individual PAGA claims in court after their individual claims are sent to arbitration. However, as to that second part, the Court left open the possibility that California could interpret or adjust PAGA to permit non-individual PAGA claims to survive and be brought in court. In short, while Viking River was a victory for employers, we noted at the time that the decision might not be the final word on the interplay between PAGA and the FAA.

In the wake of Viking River, many employers revised their arbitration agreement to take advantage of the Court's ruling by more explicitly trying to prevent a PAGA claim from going forward in court. Based on the state of the law at the time, this was understandable.

Quick Hits

• The California Supreme Court recently held plaintiffs may pursue non-individual PAGA claims in court even after their individual claims are sent to arbitration.
• The Supreme Court of the United States last year in Viking River left open the possibility that California could interpret PAGA to allow such claims.
• Employers with employees in California may want to update their arbitration agreements in light of the California Supreme Court's ruling.

Over a year after Viking River, the California Supreme Court has now rejected Viking River's second holding outlined above. Specifically, in Adolph v. Uber Technologies Inc., issued on July 17, 2023, the California court held named plaintiffs still have standing to pursue non-individual PAGA claims in court even after their individual claims are sent to arbitration. Critically, however, in doing so, the California court noted that (1) the trial court could stay the non-individual claims pending the outcome of the arbitration and (2) the outcome of the arbitration could affect whether the plaintiff has standing to pursue non-individual claims. In light of the California Supreme Court's partial rejection of Viking River and the nuances of its reasoning, employers may want to update their arbitration agreement to revise the scope of the PAGA waiver, include an explicit provision requiring a stay of non-individual PAGA claims pending the arbitration of individual PAGA claims, address other nuances in the court's opinion, and account for the possibility of future review of these issues by the Supreme Court of the United States.

The legal landscape regarding arbitration will continue to evolve, especially in California. For example, in November 2024, California voters will consider the California Fair Pay and Employer Accountability Act, which would repeal PAGA and replace it with a different enforcement mechanism. The California Chamber of Commerce, among others, strongly supports the ballot initiative.

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