In Johnson v. Lowe’s Home Centers, LLC, a decision issued on September 21, 2022, a federal judge in the U.S. District Court for the Eastern District of California issued an order compelling arbitration of a plaintiff’s individual claims under the Private Attorneys General Act (PAGA) and dismissing the remaining representative PAGA claims. In doing so, the court provided a straightforward application of the June 2022 decision by the Supreme Court of the United States in Viking River Cruises, Inc. v. Moriana, which held that while an agreement may require the arbitration of a PAGA claim on an individual basis, once the individual claim is compelled to arbitration, the representative PAGA claim should be dismissed for lack of standing.
PAGA, which was enacted in 2004, enables an employee to bring an action to recover civil penalties for violations of the California Labor Code suffered by the employee and other allegedly aggrieved employees of the same employer. Prior to Viking River, California courts had held that “categorical waivers of PAGA standing” were not enforceable and that PAGA claims could not be split into arbitrable and nonarbitrable claims.
In the Johnson case, U.S. District Judge Troy Nunley granted Lowe’s Home Centers, LLC’s motion to compel arbitration with respect to Maria Johnson’s individual PAGA claim for the alleged failure to provide paid sick leave or accurate wage statements. The most relevant provisions of the arbitration agreement included the following:
- Any controversy between the plaintiff and her employer “arising out of [the plaintiff’s] employment … shall be settled by binding arbitration.”
- The plaintiff may bring claims “solely on an individual basis.”
- The plaintiff cannot bring claims on a representative basis under PAGA.
- “[I]f a court of competent jurisdiction finds the … Representative Action Waiver unenforceable for any reason, then the unenforceable waiver provision shall be severable from [the] Agreement, and any claims covered by any deemed unenforceable waiver provision may only be litigated in a court of competent jurisdiction, but the remainder of the agreement shall be binding and enforceable.”
Johnson argued that her waiver was an unenforceable “wholesale waiver” of PAGA claims. The court disagreed, explaining:
The Court in Viking River explained that PAGA actions are “representative” in two ways: “(1) PAGA actions are ‘representative’ in that they are brought by employees acting as representatives—that is, as agents or proxies—of the State”; and (2) “PAGA claims are also called ‘representative’ when they are predicated on code violations sustained by other employees.” 142 S. Ct. at 1916. The Court further explained, “when the word ‘representative’ is used in the second way, it makes sense to distinguish ‘individual’ PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out of events involving other employees.” Id. The Court stated, “Iskanian’s principal rule prohibits waivers of ‘representative’ PAGA claims in the first sense. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum.” Id. The Court found that Iskanian’s principal rule “is not preempted by the [Federal Arbitration Act]” and thus provisions that constitute “wholesale waivers of PAGA claims” under that rule are invalid. Id. at 1924–25.
As such, Judge Nunley concluded that Johnson’s waiver was not an invalid “wholesale waiver” because it did not deny Johnson the right to “bring a PAGA action on behalf of the State for violations she suffered as an individual.” Instead, Johnson’s waiver was an enforceable waiver that provided that “the employee may not seek relief on behalf of any other parties in arbitration, including but not limited to similar aggrieved employees.”
The court also found that Johnson’s severability provision was “similar enough” to the corresponding provision at issue in Viking River to “warrant the same result”—the enforcement of an agreement to send individual PAGA claims to arbitration. As such, the court compelled Johnson’s individual PAGA claim to arbitration.
Finally, the court provided a straightforward application of Viking River to conclude that once Johnson’s individual PAGA claims were compelled to arbitration, her non-individual PAGA claims should be dismissed.
The Johnson decision highlights how under a straightforward application of the Supreme Court’s Viking River decision, properly drafted arbitration agreements are a valid and enforceable means of ensuring that a plaintiff’s individual PAGA claims may be compelled to arbitration and the nonindividual PAGA claims dismissed. However, the California Supreme Court has granted review in a case that might complicate the application of Viking River by California courts. In the meantime, employers may want to consider implementing arbitration agreements that provide the best possible provisions to ensure that individual PAGA claims are subject to arbitration and that nonindividual claims can be dismissed.
Ogletree Deakins’ California Class Action and PAGA Practice Group will continue to monitor developments regarding PAGA and the enforcement of arbitration agreements and will provide updates on the firm’s Arbitration and Alternative Dispute Resolution, California, and Class Action blogs. Important information for employers is also available via the firm’s webinar and podcast programs.
A version of this article first appeared on SHRM Online.