PAGA landmark case, but how much protection does it really provide?

By now, most California employers have heard of the landmark decision from the US Supreme Court on the Viking River Cruises v. Moriana case.  The decision made by the Supreme Court in the Viking case will ultimately allow employers to use arbitration in PAGA cases - - this also affects the plaintiff’s ability to sue on behalf of other employees, those other remaining PAGA claims would be dismissed. For an in depth look at PAGA, Littler has published a good article on the topic.

This is a big win for California employers (at least for now – more on this below).

So, what is PAGA and why has it become such an issue for California employers?  The Private Attorneys General Act was meant to help California’s Labor and Workforce Development Agency enforce and collect penalties for Labor Code violations such as unpaid wages, missed meal and rest breaks, non-compliant wage statements, and overtime violations. 

Enacted in 2004, PAGA generally allows up to one year for California workers to file lawsuits against their employers for violating labor laws.  PAGA advocates will say they are helping low wage workers enforce their labor rights – and I don’t doubt in some cases it has been a tremendous victory for the workers.  However, to some employers and HR professionals it may feel like the whole process is overreaching.  Sadly, the employees involved in a PAGA suit really don’t get that much compensation out of it with 75% of the penalties going to the State of California and the remaining 25% being split between the employees affected by the labor code violations.  Let’s not forget about attorney fees and court costs which can be recovered in successful PAGA cases.

So now what? If your company does not use an arbitration agreement, I strongly recommend you speak to an employment attorney who can help you draft one!  For those of you who had a carve-out in your arbitration agreement you it’s time to update it!

But that’s not the end… will this ruling survive?   On July 20, 2022, the California Supreme Court granted review in Adolph v. Uber Technologies, Inc., which could put the arbitration agreements protection in question again.  Stay tuned….