With the advent of the much-hailed Private Attorney’s General Act (PAGA) Reform that came last June, attorneys for the plaintiff’s bar just keep finding ways to push their agenda. And one of those maneuvers includes their continued attack on our dearly beloved arbitration agreements.
As you all should recall, we have had a bit of history with PAGA claims and arbitration agreements. In Viking River Cruises adv Moriana (2022), the United States Supreme Court held that individual PAGA claims can be forced to arbitration and nonindividual claims can then be dismissed for lack of standing. However, SCOTUS left a loose thread in their decision, which opened the door for California to tug and unravel parts of that decision. One year later, the California Supreme Court in Adolph v Uber Technologies ruled that even if individual PAGA claims are compelled to arbitration, the nonindividual or “group” PAGA claims can remain in court. However, the Supremes also said that if the arbitration determined that the lead PAGA plaintiff was not “aggrieved” (suffered any violation), then the group PAGA case could not proceed.
That language in the Uber case has allowed employers with enforceable arbitration agreements to fight two battles – first, take the lead PAGA plaintiff to arbitration and make them prove that they indeed suffered at least one violation under the California Labor Code. Then, and only if that is the case, the plaintiff is able to proceed to the bigger battle with the group PAGA claims, which would remain stayed in court until the conclusion of arbitration.
This strategy works most successfully with larger employers, where the exposure with the group PAGA claims can be massive and worth the cost of paying a very expensive arbitrator to decide if those claims can proceed. And it is in that setting that the latest battle emerges.
In the year since the Uber case was decided, the battle of the “headless PAGA cases” has unfolded. “Headless” PAGA cases are those where the plaintiff has strategically dismissed or failed to bring any individual PAGA claims, arguing that they should be allowed to circumvent that initial arbitration process and proceed directly to court on the group PAGA allegations. And as often happens with our lovely state, the appellate courts have provided differing decisions on the ability to do this.
Last December, California’s Second Appellate District ruled in Leeper v Shipt, Inc that headless PAGA claims must still be ordered to arbitration to determine the lead plaintiff’s status as an aggrieved employee. However, just a few weeks ago, the Fourth Appellate District in Parra v Parker’s Sanitation Services ruled to the contrary. While some employer-side attorneys argue that these cases address different procedural issues, the continued variance in rulings may well push these headless PAGA cases back up to the California Supreme Court to resolve the split and provide clarification.
In the meantime, anecdotally, we are seeing some progress with the PAGA Reform. In good news, the Reform has given several tools to push back and get these cases resolved faster and cheaper, often with paying an individual settlement and having counsel dismiss the group PAGA claims. In at least one case, we were also able to file a cure plan with the Labor Workforce Development Agency (LWDA) to hopefully resolve the matter completely.
Speaking of LWDA, our friends with the state of California have recently given me reason to hope. In a stunning move, they issued letters to at least one plaintiff-side law firm, attacking all their numerous recent PAGA notices as “boilerplate” and ordered them to file amended ones. The letter states that “the PAGA reforms enacted last year . . .establish a legislative intent to increase LWDA oversight of PAGA, including for purposes of providing more robust early resolution avenues for employers and to achieve more timely remedies for employees without the type of protracted and costly litigation that has led to criticism of the Act.” They criticized the PAGA letters at issue for not properly identifying the violations and instead, including kitchen sink types of allegations that we have become accustomed to seeing.
This response by the LWDA prompted the National Law Review to publish an article entitled “There is a New Sheriff in Town.” Let’s hope that is indeed true.
In response to the PAGA Reform, however, we see attorneys more aggressively pursuing class actions and bringing even stronger attacks to our beloved class action waivers. Our team is constantly reviewing the legal challenges to these arbitration agreements and updating them, but that also means that YOU, as employers, need to make sure your employees are signing the most recent versions of these agreements. And once signed, DO NOT LOSE THEM!
