Supreme Court Limits California PAGA Claims - Victory to Employers
- Richard Liu, Managing Counsel
FOR IMMEDIATE RELEASE
On June 15, 2022, the Supreme Court of the United States issued a landmark decision allowing employers to limit California Private Attorney General Act ("PAGA") claims to proceed only as individual cases, provided that employers have the required language in their arbitration agreements.
Prior to the decision, PAGA claims pose a significant compliance and employment risk to the employers, costing employers hundreds of thousands of dollars when settling such claims.
California passed PAGA in 2003 to permit individuals to sue under the California Labor Code for civil penalties that were previously only recoverable by the state. PAGA claims are particularly easy to allege because it does not have the same requirements as a class action under both state and federal laws. As a result, while the average settlement for one employee relating to wage and hour is around $10,000, if an employee alleges PAGA claims, the settlement could often go up to hundreds of thousands of dollars.
In this case, (Viking River Cruises v. Moriana), the plaintiff signed a mandatory arbitration agreement stating that she could not bring a class action against the employer. She sued over labor code violations for herself and others. California courts denied the employer's motion to compel arbitration of the plaintiff's PAGA claims. The Supreme Court disagreed, finding that arbitration agreements may require individuals to proceed PAGA claims only in individual capacities.
To review the Supreme Court decision, please click here.
What to do Next?
In light of this landmark Supreme Court decision, employers should immediately update their arbitration agreements or arbitration provisions. This will significantly limit a company's exposure to unnecessary employment claims.
Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.
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*Disclaimer: This article does not constitute legal opinion and does not create any attorney-client relationship.