Employees who have been compelled to arbitrate their individual claims under the Private Attorneys General Act of 2004 (“PAGA”), Cal. Lab. Code § 2698, et seq., maintain statutory standing to pursue non-individual PAGA claims arising out of events involving other employees, the California Supreme Court held in Adolph v. Uber Technologies, Inc., No. S274671, — P.3d — (Cal. July 17, 2023).
PAGA was enacted to facilitate broader enforcement of the California Labor Code. The statute allows “aggrieved employees” to pursue civil penalties against their employers on the state’s behalf, essentially deputizing aggrieved employees to act as a private attorney general to enforce California’s workplace laws. Cal. Lab. Code § 2699. An “aggrieved employee,” which is defined as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed,” may pursue civil penalties “on behalf of himself or herself and other current or former employees.” Id. § 2699(a), (c).
Plaintiff Erik Adolph worked as a driver for defendant Uber Technologies, Inc. delivering food to customers through the company’s Uber Eats platform. As a condition of his employment, Adolph was required to accept a technology services agreement, and because he did not timely opt out, he became bound by the arbitration provision in that agreement. The arbitration provision required Adolph to arbitrate virtually all work-related claims he might have against Uber.
In October 2019, Adolph sued Uber in California superior court claiming that Uber misclassified him and other delivery drivers as independent contractors rather than as employees. In February 2020, Adolph amended his complaint to add a claim for civil penalties under PAGA based on the misclassification theory. After the trial court granted a motion by Uber to compel arbitration of Adolph’s individual Labor Code claims and dismissed his class action claims, Adolph filed a second amended complaint, which eliminated his individual Labor Code claims and class claims and retained only his PAGA claim for civil penalties. The trial court granted Adolph’s request for a preliminary injunction, preventing the arbitration from proceeding, and denied Uber’s second motion to compel arbitration. Uber appealed both decisions, which were consolidated and affirmed by the California Court of Appeal.
In May 2022, Uber filed a petition for review with the California Supreme Court. Before Adolph could file an answer to the petition, the United States Supreme Court decided Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022). In Viking River Cruises, the Supreme Court held that the Federal Arbitration Act preempts a California rule that precluded agreements to arbitrate individual claims under PAGA, and that with the individual claims dismissed, a plaintiff no longer had standing to assert PAGA claims on behalf of others as a matter of California law. The California Supreme Court, which is not bound by the Supreme Court’s standing decision in Viking River Cruises, then granted review in Adolph v. Uber to provide guidance on statutory standing under PAGA.
On July 17, 2023, the California Supreme Court held that an aggrieved employee who has been compelled to arbitrate individual claims under PAGA that are premised on Labor Code violations actually sustained by the plaintiff maintains statutory standing to pursue non-individual PAGA claims arising out of events involving other employees in court. The Court stated that “where a plaintiff has filed a PAGA action comprised of individual and non-individual claims, an order compelling arbitration of individual claims does not strip the plaintiff of standing to litigate non-individual claims in court.” The Court noted that this interpretation of PAGA “best effectuates the statute’s purpose, which is to ensure effective code enforcement.”
The California Supreme Court noted that several amici curiae argued that the Court should narrow the statute’s standing requirements in order to curb alleged abuses of PAGA, but that “[t]hese arguments are best directed to the Legislature, which may amend the statute to limit PAGA enforcement if it chooses.” Although the number of lawsuits under PAGA dropped in 2022 as courts paused cases pending decisions in Viking River Cruises and Adolph v. Uber, California employers should now expect an uptick in PAGA lawsuits.
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