California’s Private Attorneys General Act (PAGA) has so far evaded arbitration agreements. Now, the Supreme Court of the United States will take up Viking River Cruises, Inc. v. Moriana to determine whether the Federal Arbitration Act (FAA) “requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.”
PAGA is a private enforcement mechanism that deputizes “aggrieved employees” to bring lawsuits to recover civil penalties for California Labor Code violations on behalf of themselves, other employees and the State of California. PAGA “representative actions” allow plaintiffs’ counsel to bring the claims of hundreds or thousands of employees in one action without having to satisfy the class certification standards.
This sweep is significant because PAGA provides for penalties calculated on a per pay period basis for each employee. Thus, technical violations of the California Labor Code quickly translate into seven-figure exposures. For example, the PAGA penalty for wage statement violations is $250 per employee per pay period for the initial violation and $1,000 for each subsequent violation, which nets over $6 million in penalties for a workforce of 250 employees.
California’s Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) that PAGA claims are not covered by the FAA because such claims are law enforcement actions brought on behalf of the...
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