February 27, 2023

CA Court of Appeal Holds that Plaintiff Whose Individual PAGA Claims Were Ordered to Arbitration May Still Pursue Non-Individual PAGA Claims in Court

Disagreeing with the United States Supreme Court’s conclusion in Viking River Cruises, Inc. v. Moriana, the California Court of Appeal held in Galarsa v. Dolgen California LLC that a plaintiff who has been ordered to arbitrate her individual claims for civil penalties pursuant to the Private Attorney General Act (“PAGA”) can nevertheless maintain a court action to pursue non-individual PAGA claims seeking civil penalties for alleged Labor Code violations suffered by other employees.

The Facts

In March 2016, Plaintiff Tricia Galarsa applied to work for Dolgen California LLC (“Dollar General”). Upon hire, Galarsa signed an arbitration agreement that contained a waiver of class, collective, and representative action claims, as well as a severability clause. Plaintiff’s employment ended in January of the following year. In February 2018, Plaintiff filed a lawsuit asserting a PAGA claim seeking civil penalties for alleged violations of the Labor Code suffered by her and other employees. Dollar General moved to compel arbitration of Plaintiff’s PAGA claim and stay the action pending completion of arbitration. Relying on the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC, the superior court denied the motion on the grounds that (1) an employee’s right to bring a PAGA action could not be waived, (2) the rule against waivers was not preempted by the Federal Arbitration Act, and (3) a PAGA claim could not be split into individual PAGA claims for alleged Labor Code violations suffered by Plaintiff, and non-individual PAGA claims for alleged Labor Code violations suffered by other employees. Dollar General appealed and the Court of Appeal affirmed. The California Supreme Court subsequently denied Dollar General’s petition for review.

In June 2022, the United States Supreme Court ruled in Viking River Cruises, Inc. v. Moriana that where an employee-plaintiff has signed an arbitration agreement containing a representative action waiver, an employer can compel the employee’s individual PAGA claims to arbitration and dismiss the plaintiff’s non-individual PAGA claims for lack of standing. However, Justice Sotomayor’s concurring opinion in Viking River invited California courts to consider whether the court had correctly interpreted PAGA’s standing requirement to compel dismissal. Less than one month later, in July 2022, the California Supreme Court granted review in Adolph v. Uber Technologies, Inc. to consider this very issue.

In October 2022, the United States Supreme Court granted Dollar General’s petition for writ of certiorari, vacated the Court of Appeal’s judgment, and remanded the case to the court of appeal for further consideration in light of its decision in Viking River. Following supplemental briefing from the parties, the court of appeal declined to wait for the California Supreme Court’s decision in Adolph and issued its opinion on Feb. 2, 2023, which it certified for publication on Feb. 24, 2023.

The Court’s Decision

Relying on the holding in Viking River, the court of appeal held in Galarsa that Plaintiff’s waiver of representative claims contained in Dollar General’s arbitration agreement was valid and enforceable as to Plaintiff’s own individual PAGA claims, but invalid insofar as it purported to waive non-individual PAGA claims. Thus, like in Viking River, the court relied on the severance clause to hold that the invalid waiver of non-individual PAGA claims could be severed from the arbitration agreement and Plaintiff’s individual PAGA claims seeking penalties for Labor Code violations she allegedly suffered should be arbitrated.

However, the court deviated from Viking River as to the question of whether Plaintiff retained standing to pursue the non-individual PAGA claim in court once the individual PAGA claim was sent to arbitration. The court found that Plaintiff did retain standing, because she was employed by Dollar General and was subjected to at least one of the Labor Code violations initially alleged in her pleading—in other words, her “PAGA standing does not evaporate when an employer chooses to enforce an arbitration agreement.” The court also found that the general rule against splitting a cause of action did not prohibit Plaintiff from pursuing the non-individual claim in court because the individual claim and non-individual claim are not based on the same “primary right.” Specifically, individual claims are based on Labor Code violations suffered by the plaintiff-employee, and non-individual claims are based on Labor Code violations suffered by employees other than the plaintiff. Thus, according to the court, there is no single cause of action being split.

Practical Implications

Although the Court of Appeal in Galarsa predicted that the California Supreme Court would agree with its conclusion, that remains to be seen. In the meantime, employers can expect PAGA plaintiffs to cite Galarsa to avoid dismissals or stays of non-individual PAGA claims.

We will continue to monitor Adolph and related cases, as well as the activity in complex departments that have previously been staying cases pending Adolph.