Duane Morris Private Attorneys General Act Review – 2024

California Private Attorneys General Act Prior to 2022, actions under the California Private Attorneys General Act (PAGA), Cal. Lab. Code, § 2698, et seq., emerged as one of the most popular and most effective workarounds to workplace arbitration programs used by the plaintiffs’ bar. The PAGA creates a scheme to “deputize” private citizens - “aggrieved employees” - to sue their employers for violations of the California Labor Code on behalf of their co-workers as well as the State. If successful, aggrieved employees receive 25% of any recovered civil penalties and pass the other 75% to the California Labor and Workforce Development Agency (LWDA). The PAGA authorizes the attorneys who pursue the action to collect their attorneys’ fees and costs in addition to the civil penalties. Over the past year, PAGA representative actions have exploded in California. In 2009, the California Supreme Court held in Arias, et al. v. Superior Court that PAGA actions need not satisfy class action requirements. In 2014, the California Supreme Court ruled in Iskanian, et al. v. CLS Transportation Los Angeles that the Federal Arbitration Act (FAA) does not preclude the California Legislature from deputizing employees to prosecute violations of the California Labor Code on behalf of the state and, therefore, does not preempt a state law that prohibits waiver of PAGA representative actions. Both rulings led to an increase in the number of PAGA claims, which generally grew year over year until 2022. In 2022, PAGA actions saw their first setback as a workaround to arbitration. In June 2022, the U.S. Supreme Court held in Viking River Cruises v. Moriana, et al., 142 S.Ct. 1906 (2022) that the FAA preempts California law to the extent it precludes a PAGA action from being divided into individual and non-individual components, and that individual PAGA claims are thus subject to arbitration. The U.S. Supreme Court ruled that once an employer compels an employee to arbitrate the employee’s individual PAGA claim, the representative, or non-individual, PAGA claim on behalf of other employees should be dismissed. The U.S. Supreme Court reasoned that, having been compelled to arbitrate his or her individual claim, the plaintiff no longer had standing to maintain a non-individual PAGA action in court. This was obviously a favorable ruling for employers, but Justice Sotomayor’s concurrence in Viking River complicated matters. She noted that, if the Supreme Court’s analysis of state law was wrong regarding a plaintiff’s lack of standing to maintain a non-individual PAGA action if the individual PAGA action was compelled to arbitration, then California state courts would have the last word. Taking Justice Sotomayor’s cue, the California Supreme Court took up this standing issue in Adolph v. Uber Technologies – and then issued its decision this past summer. It ruled that PAGA plaintiffs can first pursue individual claims in arbitration and then can pursue non-individual claims in court as long as they are aggrieved employees. If the plaintiff loses in arbitration, they are not aggrieved and therefore lack standing. However, if the plaintiff prevails or settles their individual claims in arbitration, they can then return to court to prosecute their non-individual PAGA claims. For companies facing PAGA claims, Adolph has ushered in a new period of workplace litigation in California. This Review offers an overview of the most significant trends and developments that shaped the PAGA landscape in 2023, as well as the key PAGA-related decisions on issues such as arbitration, preemption, manageability, and the interplay of PAGA and class and collective action theories of liability.

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