Employer Cruises to Victory with Supreme Court Arbitration Ruling

On June 15, 2022, the U.S. Supreme Court resolved the long-awaited question whether individual claims brought under California’s Private Attorneys General Act (PAGA) can be compelled to arbitration. The Court ruled in favor of employers, holding that arbitration agreements can require employees to resolve individual PAGA claims in arbitration, even if they cannot do the same with the employee’s representative PAGA claims. While the Supreme Court left intact the California Supreme Court’s holding that employers cannot compel an entire PAGA claim into arbitration, employers in California may now compel arbitration on an employee’s individual PAGA claim (assuming the parties have entered an otherwise valid arbitration agreement). Most importantly, the Supreme Court held that compelling that individual claim into arbitration removes a plaintiff’s standing to bring her representative claims in court, meaning the court must dismiss the remaining representative claims.

What does this mean for California employers?

1. Although employers still cannot compel an entire PAGA claim into arbitration, actions can be divided into individual claims (i.e., claims based on violations the plaintiff suffered personally) and non-individual claims (i.e., representative claims on behalf of the state). An employer can compel the individual claim into arbitration, which removes those claims from the court action.
2. Most notably, the Court held that without those individual PAGA claims, a plaintiff cannot continue in court to raise the representative claims on behalf of other workers. As the Court put it, “PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.”
3. An employer may only take advantage of this approach if the employee has agreed to a valid arbitration clause, including severability language that preserves the employer’s ability to enforce arbitration on the individual claims even if the employer could not compel the representative claims into arbitration. Meyers Nave recommends you contact one of our labor and employment attorneys to assess your specific situation and determine if your current agreements meet these requirements.