United States: Court Decisions Following Viking River Cruises Largely Disappoint California Employers (US)

California employers enthusiastically received the decision by the United States Supreme Court in Viking River Cruises v. Moriana, 142 S. Ct. 1906 (2022). That case held the Federal Arbitration Act allows employers to compel employees to arbitrate the individual part of their claim under the California Labor Code Private Attorneys General Act ("PAGA"). Some employers hoped that Viking River Cruises would substantially rein in PAGA litigation.

PAGA authorizes aggrieved California employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for violations of California's Labor Code. PAGA penalties can quickly accumulate given the many possible Labor Code violations and the fact that the default penalty is $100 per employee per pay period for an initial Labor Code violation, and $200 per employee per pay period for each subsequent violation.

In Viking River Cruises, the Court also concluded that an employee would lack standing to pursue a representative PAGA claim after his or her individual PAGA claim was resolved through arbitration. However, because the Court's conclusion interpreted California law, this part of the decision is not binding on California courts. The California Supreme Court is poised to decide in Adolph v. Uber Technologies Inc. whether it agrees with the United States Supreme Court on that issue. While a decision by the California Supreme Court in Adolph remains pending, several California courts of appeal have declined to follow the conclusion by the United States Supreme Court regarding PAGA standing.

For example, in Galarsa v. Dolgen California, LLC, 88 Cal. App. 5th 639 (2023) (review granted), the California Court of Appeal, Fifth District, held that a plaintiff who has been ordered to arbitrate her individual PAGA claim can nevertheless maintain a court action to pursue a representative PAGA claim seeking civil penalties for alleged Labor Code violations suffered by other employees. In Piplack v. In-N-Out Burgers, 88 Cal. App. 5th 1281 (2023) and Nickson v. Shemran, Inc., 90 Cal. App. 5th 121 (2023), the California Court of Appeal, Fourth District, reached the same conclusion.

Unlike these disappointing (for California employers) decisions, the recent decision by the Court of Appeal, Second District in Rocha v. U-Haul Co. of California, 88 Cal. App. 5th 65 (2023), provides hope for employers. In that case, the appeals court held that issue preclusion bars a representative PAGA claim when the plaintiff litigates individual Labor Code claims in arbitration and loses. Given that a plaintiff must have personally experienced a violation of at least a single provision of the Labor Code to bring a representative PAGA claim, Rocha emphasizes the important hurdle individual PAGA litigants face in arbitration. It also is important to note that the decision in Rocha is contrary to that by the California Court of Appeal, Fourth District, in Gavriiloglou v. Prime Healthcare Management, Inc., 83 Cal.App.5th 595 (2022), which held that an arbitration award in the employer's favor did not deprive the plaintiff employee of standing to pursue a representative PAGA claim.

In sum, Viking River Cruises has not been the game-changer some California employers hoped. Although California employers may continue to hope the California Supreme Court decides Adolph v. Uber Technologies Inc. in their favor, that seems unlikely, particularly if the California courts of appeal decisions discussed above rejecting the United States Supreme Court's conclusion regarding PAGA standing are predictive.

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