In Adolph, California Supreme Court Holds That Plaintiffs Compelled to Arbitrate Their Individual PAGA Claims Have Standing to Pursue “Non-Individual” PAGA Claims in Litigation on Behalf of Others

The California Supreme Court has issued its highly anticipated decision in Adolph v. Uber Technologies, Inc., concluding that plaintiffs who must arbitrate their “individual” PAGA claims are not deprived of standing to pursue “non-individual” PAGA claims in court on behalf of others.

More precisely, Justice Goodwin H. Liu wrote that “an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.”

While the decision is sure to be a disappointment to employers doing business in California, Adolph does not mean that arbitration agreements are now meaningless or that employers are without options. 

While having to arbitrate individual PAGA claims may not deprive an employee of standing to pursue non-individual PAGA claims, that does not mean that other developments might not deprive an individual of that standing – such as a determination in favor of the employer in the individual arbitration. If an arbitrator were to rule in favor of an employer on an employee’s individual arbitration claims, that would seem to deprive the employee of standing to pursue claims on behalf of others because that employee would not be an “aggrieved employee.”  And only an “aggrieved employee” may represent others in a “non-individual” PAGA action.

At this time, it would seem that employers in most cases will still want to compel the individual PAGA claims to arbitration and, if they prevail, take the position that the employees no longer have standing to pursue the “non-individual” PAGA claims. However, in some cases – particularly those where an employer may be pessimistic about the chances of prevailing in the individual arbitration (or where it is concerned about the not insignificant costs of arbitration), it may make sense for an employer to forego the arbitration and proceed with the “non-individual” claims in court, where there may be grounds to strike the PAGA claims as unmanageable. 

As avoiding PAGA actions and prevailing in an individual arbitrations will now be more important than ever, employers with arbitration agreements would be wise to take additional steps to ensure compliance with California wage-hour laws.