The California Supreme Court granted review of Adolph v. Uber Technologies, Inc. (“Adolph”) in July 2022. The case calls into question whether a PAGA representative maintains standing for the representative portion of their PAGA claim after their individual PAGA claim was compelled to arbitration. State courts across California are split on whether to stay, dismiss, or allow the representative PAGA action to continue, despite the individual PAGA claims being compelled to arbitration. The central question is whether someone with an individual PAGA claim in arbitration can still serve as a representative for the broader PAGA claim (the class action-like portion) where their own claims will be resolved in arbitration (i.e., do they lose “standing” to serve as a representative).
Adolph will answer that question and will define the scope of PAGA waivers in arbitration agreements.
Why is Adolph so important?
PAGA has long been a thorn in employers’ side. The expensive penalties for seemingly trivial wage-and-hour violations add up quickly and can result in small- to medium-sized companies having to close their doors. Employers found some relief after last year’s U.S. Supreme Court ruling in Viking River Cruises, Inc. v. Moriana, where the court ruled that individual PAGA waivers are enforceable and that the remaining representative PAGA claim should be dismissed. Of course, some California courts spoiled that party soon after by holding that the representative PAGA claims can proceed in court, even though the individual portion of the claim was gone.
Currently, it’s a coin toss whether PAGA waivers in arbitration agreements will save employers from the expensive part of PAGA claims. The clarity from Adolph will have substantial impact on potential PAGA liability. Will representative PAGA claims remain a viable threat or will there be some much-needed relief for California employers? We will soon find out.
Last week, the California Supreme Court set oral argument in Adolph for May 10, 2023. After oral argument, the 90-day clock starts for the court to issue its decision. Mark your calendars now, by August 7, 2023, the future of PAGA waivers will be known.