Viking River Cruises v. Moriana: California’s Ban on Waiving Individual PAGA Claims in Arbitration Agreements Sails Off Into the Sunset

By Jim McNairy and Kendall C. Fisher-Wu

On June 15, 2022, the United States Supreme Court issued its Opinion in Viking River Cruises v. Moriana (“Viking River”). The Court overruled in part an earlier California Supreme Court decision concerning claims made under California’s Private Attorneys General Act (“PAGA”). The U.S. Supreme Court’s decision, marking a major shift in California law, upholds the enforceability of arbitration agreements requiring an employee to arbitrate his or her individual PAGA claims. The Court further held that an employee whose individual PAGA claim is submitted to arbitration under a valid arbitration provision lacks standing to maintain a separate action on behalf of others allegedly aggrieved under PAGA.

 Background

Angie Moriana worked for Viking River Cruises, Inc. (“Viking”) as a sales representative.  As part of her onboarding as a new employee, she signed an arbitration agreement with Viking, agreeing to arbitrate any dispute arising out of her employment with Viking.  Viking included a “Class Action Waiver” in this agreement, which provided that the signing employee waived their right to file a class, collective, or representative PAGA action against Viking arising out of their employment.  Importantly, the arbitration agreement included a severability clause providing that, in the event the class action waiver was found invalid, such an action could be pursued in court, but if any portion of the waiver remained valid, it would still be enforceable in arbitration.

After leaving Viking, Moriana filed a representative PAGA action against the company on behalf of herself and other “aggrieved employees.”  Viking filed a motion to compel arbitration, pointing to the arbitration agreement Moriana signed.  The trial court denied Viking’s motion, following California precedent (namely Iskanian v. CLS Transport Los Angeles) and holding that categorical waivers of standing to bring PAGA claims are void as against public policy and that PAGA claims cannot be split into arbitrable individual claims and non-arbitrable representative claims.  The California Court of Appeal affirmed the decision, and Viking petitioned the U.S. Supreme Court for a writ of certiorari, which it granted.

The U.S. Supreme Court’s Decision

The U.S. Supreme Court reversed the trial court’s decision.  The U.S. Supreme Court held that the Federal Arbitration Act (“FAA”) preempts Iskanian’s holding that PAGA claims cannot be split into individual and representative actions.  Because Iskanian required the joinder of individual and representative PAGA claims, the Supreme Court concluded that it was “incompatible with the FAA.”  The Court held that a waiver of “representative” or “non-individual” PAGA claims would still be invalid, so any arbitration agreement that contains such a wholesale waiver without a severability clause like the one in Viking’s agreement could still be invalid under what remains of Iskanian.

Because Viking’s arbitration agreement contained a severability provision, the Court relied on that clause to narrow what would otherwise be an invalid “wholesale” waiver of all PAGA claims.  Based on the narrowed provision, the Court held that Viking could enforce its arbitration agreement with Moriana as to her individual PAGA claim.  Because Moriana’s individual PAGA claim could be arbitrated, she no longer had standing to maintain PAGA claims on behalf of others in the representative PAGA action.

In what may have been foreshadowing of future California legislative action, Justice Sotomayor authored a concurring opinion.  She cast doubt on the majority’s understanding of California law and noted that, in any event, the Legislature “is free to modify the scope of statutory standing under PAGA within state and federal constitutional limits.”  By this comment, it appears that Justice Sotomayor meant the Legislature could expand statutory standing and redefine who has standing to bring a PAGA representative action.  However, such an amendment to PAGA may be met with swift legal challenges under the FAA.

Takeaways for Employers

While Viking River is a welcome turn of the California tide, it is not a complete reversal of Iskanian.  If not for the severability clause in Viking River’s arbitration agreement and the language covering arbitration of individual PAGA claims, the outcome of this case likely would have been different.

• Employers should promptly review with counsel the language in their arbitration agreements to ensure that they are legally compliant and provide for arbitration of an individual’s claims under PAGA.

• To the extent that employers have PAGA claims about to be in or in litigation, they should double-check to see if employees asserting those claims signed arbitration agreements requiring arbitration of individual PAGA claims.

The lawyers in Boutin Jones Inc.’s Employment Group are ready to help.