A landmark employment law case will soon be decided by the California Supreme Court, which will require California’s top court to go head-to-head with the United States Supreme Court, over the application of employer arbitration agreements that seek to limit employees from pursuing Private Attorney General Act (PAGA) claims against them, and proceed to arbitration instead.
The soon-to-be landmark decision involves Erik Adolph, who was a driver for UberEATS, a meal delivery service. The company through which drivers are connected with those in need of UberEATS’ services is owned by Uber Technologies Inc..
Before he began making deliveries for UberEATS in March 2019, Adolph created an account to use the UberEATS app. In creating his account, Adolph accepted an arbitration agreement, which “is governed by the Federal Arbitration Act.”
In October 2019, Adolph filed a putative class action complaint against Uber, claiming that Uber had misclassified employees as independent contractors, and had therefore failed to reimburse the class members for necessary work expenses. The complaint was amended to include only a California Private Attorney General Act (PAGA) cause of action. Uber filed a petition to compel arbitration of Adolph’s individual claims, strike the class action allegations, and stay all court proceedings.
But the trial court denied Uber’s petition to compel arbitration citing California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384 and the cases following it, .
In Iskanian the California Supreme Court held “that an employee’s right to bring a PAGA action is unwaivable,” and that “here . . . an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.”
Uber appealed the ruling of the trial court. On April 11, 2022 the Court of Appeal affirmed the trial court in the case of Adolph v Uber Technologies Inc. – G059860 (consol. w/ G060198). The case was unremarkable at the time, hence it was “unpublished.”
The Court of Appeal acknowledged that about 11 days prior to its April 11 opinion the “United States Supreme Court heard arguments on March 30, 2022, in the case of Viking River Cruises, Inc. v. Angie Moriana, case no. 20-1573 (Viking).” And that the issue before SCOTUS was “Whether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.”
Nonetheless, rather than waiting for a decision by the SCOTUS, the Court of Appeal went ahead and fell in line with other California decisions and concluded that “Unless and until the United States Supreme Court or the California Supreme Court directly overrules it, the courts of this state must follow the rule of Iskanian (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455), which establishes that the trial court did not err by concluding that the initial issue of whether Adolph can pursue a PAGA claim as an aggrieved employee must be decided by the trial court, not an arbitrator.”
About two months later, SCOTUS published its decision in Viking on June 15, 2022, agreeing with the employer, and limiting the application of Iskanian in California. It said “When an employee’s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit.” As a result, Moriana would lack statutory standing to maintain her non-individual claims in court, and the correct course was to dismiss her remaining claims.
The U.S. Supreme Court decision in Viking has now – at least temporarily – disrupted the PAGA process against employer’s who have arbitration agreements in California Hence, on July 22, 2022 the California Supreme Court granted Uber’s Petition for Review in the Adolph case. The Uber case which was unremarkable is now remarkable, since the timing make it the case chosen to decide how Viking will work in California.
The case will now be the arena where California employers will wage their battle to limit the application of the Private Attorney General Act against them, in favor of arbitration of each employees individual claim. The outcome of the battle is uncertain, but will no doubt be closely followed, as it will have a major impact on California employment law – one way or the other.