Gordie Webster

published on July 28, 2023 - 2:43 PM
Written by Gordon Webster, Jr.

A tale of three Supreme Court rulings — two federal, one state — illustrates just how difficult it is to be a business owner these days.

The California Supreme Court ruled last that week that employees may take nonindividual claims to court even if a valid arbitration agreement requires their own personal claims to be arbitrated.

As reported by the California Chamber of Commerce, the state high court’s ruling in Adolph v. Uber Technologies, Inc. opens the door for plaintiffs whose individual claims must be arbitrated to pursue representative claims in court under the Private Attorneys General Act (PAGA).

As I’ve written about before, PAGA has meant billions of dollars in penalties for employers since it was enacted in 2004. It allows “an aggrieved employee” to bring civil action against an employer on behalf of themselves and other current or former employees, acting as a proxy or agent of the state.

“The ruling means employers may face more litigation costs because employees still can pursue PAGA claims in court, even if a valid arbitration agreement is in place,” said Bianca Saad, CalChamber vice president of labor and employment. “It highlights the need for PAGA reform.”

The ruling is a departure from last year’s U.S. Supreme Court decision in Viking River Cruises v. Moriana, which said that the Federal Arbitration Act preempts California Supreme Court case law that precluded dividing PAGA actions into individual and nonindividual claims.

The practical impact of this latest state high court decision is that a plaintiff’s ability to pursue civil litigation will add to the time and expense of employers, which doesn’t bode well for the state’s business climate.

The ruling comes after a separate, recent Supreme Court decision that requires district courts to automatically stay litigation while parties appeal whether a claim should instead go to arbitration.

Closer to home, the ruling also illustrates the need for meaningful PAGA reform.

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