Individual PAGA claim must cruise to arbitration

There has long been a conflict between California and the federal government over the topic of arbitration. Decades ago, arbitration was viewed as a win-win process providing the parties with a quicker and less expensive way of resolving disputes. The policy was embodied in the Federal Arbitration Act (FAA), which requires (1) the recognition of arbitration agreements as valid contracts and (2) their enforcement except under circumstances when any other contract would be void, e.g., if the agreement is unconscionable or tainted by improper bias or other gross irregularity. Congress adopted the FAA “in response to judicial hostility to arbitration.”

In recent years, California statutes and cases have tried to impose other restrictions on unfair preemployment arbitration agreements, only to have them reinstated by federal courts enforcing the FAA. The California Supreme Court has since bowed to the federal mandate and held that class action waivers are generally enforceable. But the state supreme court came to a different conclusion regarding cases brought under the Private Attorneys General Act (PAGA), which allows any employee who suffered any labor code violation to assert all labor code violations on behalf of every coworker. The court reasoned that the claims are filed on the attorney general’s behalf, so they can’t be waived by an individual employee.

On June 15, 2022, a nearly unanimous U.S. Supreme Court split the baby even further, finding a worker’s agreement to arbitrate her own PAGA claim on an individual basis, rather than on a representative basis, is enforceable under the FAA.