In Viking River Cruises, Inc. vs. Moriana, Case No. 20-1573, the United States Supreme Court granted certiorari to decide whether representative claims under the Private Attorneys General Act (PAGA) are subject to individual arbitration. In
Iskanian vs. CLS Transportation Los Angeles, LLC, 59 cal. 4th 348 (2014), the California Supreme Court announced a rule prohibiting individual arbitration of PAGA claims, but the Court is generally expected to rule that the Federal Arbitration Act (FAA) prevails over the iskanian ruler. (To read a summary of the
Viking River Cruises pleading, click here.)
This two-part series examines what could happen next. In Part 1, we explored the arguments that are likely to feature in the deluge of motions to compel arbitration that will follow any ruling abrogating iskanian. (To read Part 1, click here.)
In Part 2, we explore how the California legislature may respond. The legislature has shown a strong commitment to the law, resisting even calls for reform from the political left. Notably, Gov. Jerry Brown (D-CA) proposed modest reforms in 2016 to “stabilize and improve the handling of PAGA cases.” The Legislature adopted some of his proposals but declined minor changes such as requiring PAGA plaintiffs to cite legal authorities and estimate the number of affected employees during mandatory prior state notification. .
Voters can also pressure lawmakers to act. the
Viking River Cruises The argument drew mainstream media attention to PAGA for perhaps the first time in the law’s history, from outlets such as the Los Angeles Timesthe
San Francisco Chroniclethe San Diego Union-Tribune, Voiceand Reuters. If the voting public perceives the predominantly conservative Supreme Court as interfering with California’s ability to protect its employees, they can demand action (e.g., Charles P. Pierce, Squire“John Roberts has a new opportunity to prove his loyalty to the corporate oligarchy: a California jobs law comes under fire” (December 15, 2021)).
For these reasons, Sacramento should be expected to do whatever is necessary to legislate around the Viking River Cruisesdecision and preserve the private attorney general model of California labor standards enforcement. He will have several plausible options for doing so.
Allow the LWDA to exercise greater oversight over PAGA litigation. The plaintiff and the friends in
Viking River Cruises argued, among other things, that the FAA is not an impediment to the iskanian rule, because the true interested party in a PAGA action is the State of California, which has not consented to arbitration. An obvious criticism of this argument is that once a PAGA Complainant has notified the alleged violations and the Labor and Workforce Development Agency (LWDA) decides not to prosecute them, the State has no control over the litigation, no right to intervene and essentially no involvement. in any dispute.
In light of this criticism, some PAGA supporters have suggested that if the Supreme Court strikes down iskanianCalifornia could legislate around the decision giving the LWDA additional power to oversee PAGA litigation, including, for example, giving it the power to intervene in a lawsuit at any time.
Any attempt to legislate around the Supreme Court decision will lead to legal challenges. The LWDA’s authority to exercise control is arguably irrelevant in light of the Supreme Court’s repeated instruction that courts “strictly apply[…]arbitration agreements in accordance with their terms, including terms that specify with who the parties choose to arbitrate their disputes[.]” Epic Systems Corp. against Lewis, 138 S.Ct. 1612, 1621 (2018) (citation omitted). However, state courts and the 9th Circuit have always been skeptical of attempts to compel PAGA’s claims to individual arbitration. Therefore, it is possible that such a reform will allow plaintiffs to continue to sue PAGA for years to come, until the Supreme Court has a chance to rule on the amended law.
Elimination of the requirement that a PAGA claimant be an aggrieved employee. PAGA provides that a civil action may be brought by any “aggrieved employee”. Cal. Laboratory. Code § 2699(a). Consequently, a decision annulling
iskanian would allow employers to protect themselves from PAGA claims by requiring their employees, as a condition of employment, to sign arbitration agreements waiving the right to bring representative claims.
However, there is no reason for the law to limit the pool of potential private attorneys general to “aggrieved employees.” During his closing argument, Judge Alito observed that California “could have simply said that anyone in California or perhaps anywhere else could sue to assert any violation of the labor code” . Because “that person would not be in any sort of contractual relationship with the employer…the FAA would be [not] get into the picture.” Hrg. Tr. at 27:18-28:3.
The Texas Heartbeat Act provides a high level proof of concept. The law, which prohibits abortions after detection of a fetal heartbeat, broadly empowers “[a]any person, other than an officer or employee of a state or local government entity within that state, “may ‘bring a civil action’ for alleged violations of the law. Health and Safety Code of Texas § 171.208(a) U.S. Supreme Court Court brushed aside criticism that such a broad provision wrongly “delegates”[es] [the
state’s] enforcement authority to the whole world”
Whole Woman’s Health v. Jackson, 142 S.Ct. 522, 535 (2021) (citing Sotomayor, J., concurring in part)), and its tacit endorsement may encourage California to expand the scope of PAGA’s permanent requirement – as Justice Alito has previously suggested.
Indeed, Governor Gavin Newsom (D-CA) has proposed that California pass a similar law allowing private citizens to bring civil suits to enforce gun control laws. Shawn Hubler, New York Times“Newsom Calls for Gun Legislation Inspired by Texas Abortion Law” (December 12, 2021).1 And the Massachusetts Legislature is already considering a bill (H.4681), apparently inspired by PAGA, that would grant standing to nonemployees. H.4681 would allow lawsuits not only by injured employees, but also by contractors, suppliers, or customers with nonpublic information about alleged violations. It’s not inconceivable that California could follow suit with a similar, if not larger, bill.
Invalidate any agreement required as a condition of employment. The FAA provides that arbitration agreements are “valid, irrevocable, and enforceable, except on grounds that exist in law or equity for revocation of any contract.” 9 USC § 2. This provision “establishes a principle of equal treatment: a court may invalidate an arbitration agreement on the basis of generally applicable contractual defenses”, but not on the basis of a rule “discriminating against prima facie arbitration” or “disadvantaging contracts which (oh so coincidentally) have the defining characteristics of arbitration agreements.” Kindred Nursing Centers LP v. clark, 137 S.Ct. 1421, 1426 (2017).
A state law invalidating everything agreements required as a condition of employment should not conflict with this principle.
Epic Systems, 138 S.Ct. at 1622 (“[T]The escape clause only recognizes defenses that apply to “any” contract. “).2 However, this option could have a myriad of unintended consequences, such as preventing employers from enforcing codes of conduct or protecting trade secrets. Even vehement supporters of PAGA might be hesitant to support this approach.
Congress could also act.Because the FAA provides the basis for reversing
iskanianCongress could also legislate around Viking River Cruises by changing the law. For example, Congress might expressly authorize certain state laws, such as laws against prior litigation waivers regarding private attorney general claims or laws prohibiting mandatory labor arbitration.
Such a measure would require bipartisan support to secure the 60 votes needed to pass in the Senate, which seems unlikely. However, the House and Senate recently voted overwhelmingly in favor of the Ending Sexual Assault and Sexual Harassment Compulsory Arbitration Act of 2021, which amends the FAA to provide that pre-trial arbitration agreements disputes are unenforceable with respect to claims of sexual harassment and sexual assault. Pub. Law 117-90, § 2. So, while it’s hard to imagine Congress moving to allow private lawsuits against employers — especially in an election year when Republicans are expected to choose one or both chambers – the possibility cannot be ruled out of control.
In sum, predictions of PAGA’s demise are premature. Employers should prepare for the real likelihood that California will continue to employ a private attorney general model for labor standards enforcement in the years to come, regardless of the Supreme Court’s ruling on the matter. Viking River Cruises.
1. The California Legislature is currently considering AB 1594, a less sweeping version of Governor Newsom’s proposal that requires a private plaintiff to have “suffered injury” before suing.
2. However, opponents of such a law would likely argue that it “disadvantages[s] contracts which (coincidentally) have the defining characteristics of arbitration agreements.”
Kindred Nursing Centers, 137 S.Ct. at 1426.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.