The US Supreme Court and the California Supreme Court issued decisions limiting the power of the Private Attorneys General Act ("PAGA"), making it harder for employees to successfully adjudicate their claims in court.
Since 2003, employees in California have used PAGA, a unique (and so very Californian) law, to bring claims of labor code violations against employers. Under PAGA, employees wield the power of the state as a tool to make a quasi "citizen's arrest"—via civil penalty—of employers who violate the labor code.
These penalties can be substantial, and are ultimately awarded to both the state (recovering 75% of the total penalties) and representative employees (recovering the remaining 25%). While there is certainly an economic incentive for employees to file a PAGA action, these claims are predominately meant to play a significant role as a state regulatory power wielded by its citizens.
FAA Supersedes PAGA
The most recent blow to PAGA came from the US Supreme Court in the case of Viking River Cruises, Inc. v. Moriana. In its holding, the Court made it so employers can now compel arbitration of an employee's PAGA claims on an individual basis. However, if an employee's individual PAGA claim is arbitrated, that employee no longer has standing to bring a representative claim under PAGA. Following this decision, employers can include language in their arbitration agreements requiring arbitration of individual PAGA claims.
No More Juries After LaFace
In another blow to the power of PAGA, the California Court of Appeals, in LaFace v. Ralphs Grocery Co., held that despite PAGA claims being brought by citizens of the state, there is no right to a jury in PAGA cases. As the court noted, "PAGA is not a garden variety civil penalty action." While civil actions are typically brought by plaintiffs on their own behalf, PAGA actions are brought by citizen plaintiffs who act as "mere proxies for the state." Put simply, PAGA cases are disputes between the employer and the state, and it would be strange and unfair for the state of California to enjoy the benefit of a jury of peers.
So, What Does This All Mean?
A refocus towards the "administrative" function of PAGA thanks to LaFace and the freedom to arbitrate thanks to Viking River means PAGA cases will be more streamlined and should have more predictable outcomes for employers and employees alike. For any employer or employee in California, this is certainly something worth keeping an eye on.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
