On June 15, 2022, the U.S. Supreme Court decided Viking River Cruises, Inc. v. Moriana, No. 20-1573, holding that the Federal Arbitration Act (FAA) preempts a rule of California law insofar as it precludes agreeing to arbitrate only an employee’s individual claims under California’s Labor Code Private Attorneys General Act (PAGA).
PAGA authorizes any “aggrieved employee” to initiate an action against a former employer “on behalf of himself or herself and other current or former employees” to obtain civil penalties. California precedent holds that all PAGA suits are representative actions in the sense that the employee-plaintiff sues and receives civil penalties as an agent or proxy of the State. But in addition, an employee-plaintiff can sue not only for alleged labor violations that he or she experienced (individual claims) but also for alleged violations that any other employee experienced (non-individual, or representative, claims). The California Supreme Court held that, under PAGA, an employee cannot agree to arbitrate only his or her individual claims without also being permitted to arbitrate representative claims.
Plaintiff Angie Moriana signed a contrary arbitration agreement with her employer, Viking River Cruises, Inc., in which she agreed to arbitrate any individual PAGA claim she might have, but waived the right to bring “representative” PAGA claims. Viking moved to compel arbitration of Moriana’s individual claim (which involved her final wages) and dismiss the “non-individual” claims (which raised a number of other alleged labor violations that Moriana did not experience). The trial court denied that motion under the rule prohibiting the division of individual and representative PAGA claims, and the California Court of Appeal affirmed.
The Supreme Court reversed. The FAA grants parties the right to determine which issues they will agree to arbitrate. By requiring parties to arbitrate representative claims in order to arbitrate individual claims, PAGA violates this right and is therefore preempted. “The only way for parties to agree to arbitrate one of an employee’s PAGA claims,” the Court reasoned, “is to also ‘agree’ to arbitrate all other PAGA claims in the same arbitral proceeding.” But state law “cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.” Viking was therefore entitled to compel arbitration of Moriana’s individual claim. With her individual claim in arbitration, Moriana no longer had standing under PAGA’s own terms to litigate the representative claims in court. The Supreme Court ordered those claims to be dismissed.
Justice Alito authored the opinion of the Court, in which Justices Breyer, Sotomayor, Kagan, and Gorsuch joined, and in which Chief Justice Roberts and Justices Kavanaugh and Barrett joined in part. Justice Sotomayor filed a concurring opinion. Justice Barrett filed an opinion concurring in part and in the judgment, in which Justice Kavanaugh joined and in which Chief Justice Roberts joined as to all but the footnote. Justice Thomas filed a dissenting opinion.