6/21 UPDATE: U.S. Supreme Court Declines to Hear California PAGA Arbitration Cases

By Megan Dowden & Russ Bleemer

The U.S. Supreme Court Monday morning rejected an attempt to cut back a California interpretation of the state's Private Attorneys General Act that would allow collective claims to go to court under PAGA where workers have a mandatory arbitration provision in their employment agreements.

The rejection of certiorari in Uber Technologies Inc. v. Gregg, No. 23-645, for now preserves the mass claims that PAGA allows, but only after the employees arbitrate their individual claims. The controversial law was scheduled to be on the ballot as a referendum this November barring a compromise between business and consumer interests, with a June 27 deadline to take the measure off the ballot. An agreement was reached between business and labor leaders, and state government officials, on Tuesday, to continue the law, soften its effect on businesses, and remove the measure from the ballot.

The Supreme Court order can be found here. A California case similar to Gregg, Lyft Inc. V. Seifu, 23-769, also was denied certiorari on today's order list.

Both cases would have followed up Viking River Cruises v. Moriana, 596 U.S. __ (2022) (available here), which held that the PAGA mandate invalidating arbitration agreements was inconsistent with the Federal Arbitration Act's broad enforcement of employment agreement clauses requiring workers to go to alternative dispute resolution to resolve disputes with their employers.

Viking River held that the FAA preempted California law and California could not prohibit individual claims and representative claims from being separated into separate claims. Further, it held that the individual claims under PAGA were required to be handled in separate proceedings.

For Viking River analysis, please see Arjan Bir Singh Sodhi & Russ Bleemer." Supreme Court Limits California’s PAGA Law on Employment Claims Date," CPR Speaks ( June 15, 2022) (available here).

But a Viking River concurring opinion by Justice Sonia Sotomayor stated that the California courts and legislature should clarify the Supreme Court's interpretation on the specific subject of whether a separate collective court action could be maintained after workers go through individual arbitration.

In Gregg, 89 Cal.App.5th 786 (Cal. Ct. App. 2023) (available here), a California state appeals court wrote, "we conclude that under California law, Gregg is not stripped of standing to pursue his non-individual claims in court simply because his individual claim must be arbitrated. Consequently, his non-individual claims are not subject to dismissal at this time."

Had the Court agreed to hear Gregg, it would have been expect to explore the open Viking River Cruises issue, as well as ambiguities arising from another predecessor California PAGA case, Adolph v. Uber Technologies No. S27671 (Cal. S. Ct. July 17, 2023). Both cases discuss the 2003 California law, which allows individuals to file claims as a representative of the state in employment-law violations in addition to making their individual claims.

After Viking River Cruises ruled that mandatory individual arbitration under the Federal Arbitration Act can't be overridden by the state law, Adolph v. Uber Technologies returned to California state law when it disagreed with the Supreme Court’s Viking River decision. Adolph held that non-individual PAGA claims can maintain statutory standing in court when individual claims are sent to arbitration. The California Supreme Court noted Justice Sotomayor's concurrence in its ruling, stating that it was not bound by the nation's top Court's interpretation of California law.

"[A]lthough the high court’s interpretations may serve as persuasive authority in cases involving a parallel federal constitutional provision or statutory scheme," wrote California Supreme Court Justice Goodwin Liu in a unanimous 7-0  opinion, "Viking River does not interpret any federal provision or statute similar to PAGA." [Liu's citations are omitted.] For more on Adolph, please see Michael Yan "Despite SCOTUS’s Viking Arbitration Ruling, California Permits PAGA Standing for Some Claims," CPR Speaks (July 20, 2023) (available here).

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Meantime, the controversy over the law--bitterly opposed by California business interests since it was passed two decades ago--was at its peak due to a June 27 deadline to remove a referendum on the law from the November election ballots. It surely was on the table for the Supreme Court justices' conference table when it discussed Gregg June 13, though the Court, as is the usual practice, did not provide a reason for declining to hear the case.

Calif. Gov. Gavin Newsom sought a compromise on the ballot measure that would have subject PAGA to an up-or-down vote in November's elections with the state's business and labor leaders. Both sides, according to multiple reports, were trying to avoid the tens of millions of dollars the ballot fight would cost in campaigning. For more, see Eliyahu Kamisher, Josh Eidelson and Andrew Oxford, "Gavin Newsom Wants to Curb a Labor Law That Cost Businesses $10 Billion," Bloomberg (June 12) (available at https://yhoo.it/4es5dLB).

Newsom announced a successful compromise that reforms the statute's operations and state oversight on June 18, a day after the nation's top Court declined to hear the case.  See the governor's press release summary here.  For more, see Kurtis Lee, "California Moves to Modify Law Letting Workers Sue Employers," N.Y. Times (June 18) (available at https://nyti.ms/4eC9Gv1).

See an analysis on the California Employee Civil Action Law and PAGA Repeal Initiative  on Ballotpedia here. The compromise must be signed into law by Newsom before the June 27 ballot removal deadline.

The compromise appears as though it addresses Gregg /Lyft issue, and it's possible that practicality won out in the Supreme Court's denial of further refinement by the Supreme Court of California arbitration law.

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Dowden, a law student at the Northeastern University School of Law in Boston, is a CPR 2024 summer intern. Bleemer edits Alternatives to the High Cost of Litigation for CPR.

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