Stay Informed

On July 17, 2023, the California Supreme Court issued an opinion that will have a vast impact on arbitration and California’s Private Attorneys General Act (“PAGA”). In Adolph v. Uber Technologies, 2023 WL 4553702, the California Supreme Court held that non-individual claims under PAGA can remain in court when individual claims are sent to arbitration.

How did we get here and what does this decision mean for employers?

What is PAGA?

PAGA was enacted to allow aggrieved employees to file lawsuits for Labor Code violations against employers on behalf of the individual employee, other employees, and the State of California. It was an attempt to resolve the Department of Industrial Relations’ difficulty in enforcement labor laws because of its limited resources.

PAGA promotes enforcement by giving an employee the ability to “act” on behalf of the State. Seventy five percent of a successful PAGA award is paid to the state, while 25 percent is recovered by the filing employee. PAGA benefits both the individual employee who can recover on their own behalf (individual claims) and permits the State to punish the employer for violations against other, similarly situated employees (non-individual claims.) Employers have long been attempting to find ways to prevent employees from bringing both individual and non-individual claims via PAGA waivers in arbitration agreements. These attempts were recently challenged by the U.S. Supreme Court in Viking River Cruises v. Moriana (2022) 142 S.Ct. 1906.

Viking River Cruises v. Moriana

In Viking, the court held that an individual employee lacked standing to bring a non-individual PAGA claim on behalf of other employees in a court, only allowing the employee’s individual dispute to be handled in a different forum i.e. arbitration.

The ruling in Viking left many questions to be answered in California employment law because the Viking ruling did not align with the prior line of PAGA cases in California. The decision was a temporary win for employers because it limited the claims that could be brought by an employee. However, the Adolph court carefully made the distinction that PAGA was a state issue and should be decided separate and apart from Viking.

Adolph v. Uber Technologies

Given the ruling in Viking and the impact it would have on employees in California, the California Supreme Court sought to provide further clarity on what Viking meant for the employees of California. Enter Adolph v. Uber Technologies.

In Adolph, Erik Adolph, an Uber Eats delivery driver, filed suit regarding misclassification of Uber drivers as independent contractor rather than employees in 2019. Adolph’s position aligned with prior state court decisions supporting the premise that an aggrieved employee does not lose standing to pursue “representative” PAGA claims on behalf of other employees merely because they must arbitrate their own PAGA claims. Essentially, Adolph took the position that he should be allowed to purse both his individual claims and non-individual claims in arbitration and/or in court. Uber took the position that Adolph signed a contract requiring him to take any employment-related disputes to arbitration, thus he could not lead a case in court on behalf of other drivers.

The issue before the court was whether an employee could adjudicate their own individual PAGA claim in arbitration while maintaining an ability to bring a non-individual PAGA claim in court. Justice Liu, writing for the Adolph court stated, “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.” According to the court, an employee has statutory standing to litigate non-individual PAGA claims if he (1) “was employed by the alleged violator” and (2) is someone “against whom one or more of the alleged violations was committed.” A plaintiff who satisfies both requirements does not lose standing based on the “enforcement of an agreement to adjudicate [his] individual claim in another forum.”

Adolph is a big win for employees as it refutes the U.S. Supreme Court’s ruling in Viking and, again, forces employers to face the prospect of having one claim bought in multiple forums.

Clarity for Employers

What can employers do to address the recent ruling in Adolph?

The Adolph decision implies that if an employee is unsuccessful at arbitration on an individual claim, that employee could be precluded from pursuing PAGA claims for other employees in court. The Adolph decision also appeared to assert that an employee’s non-individual PAGA claims should be stayed pending the arbitration of their individual PAGA claims.

These two takeaways appear to provide employers with some level of hope after the Adolph decision. Employers should consult with skilled legal counsel to determine ways to limit exposure prior to being faced with a PAGA claim and in light of the Adolph decision.

For more information, or specific guidance on how this decision could impact your business, please contact Ryan Karrer and the Walsworth employment team.