California Court of Appeal Declines to Follow Viking River Cruises Ruling and Holds Employees Who Signed Arbitration Agreements Have Standing to Pursue PAGA Representative Claims in Court

June 2023

In 2018, a former Lyft driver filed suit under the Private Attorneys General Act of 2004 (“PAGA”) in Los Angeles County Superior Court against Lyft, alleging misclassification of himself and other drivers as independent contractors, rather than employees, thereby violating multiple provisions of the California Labor Code. Seifu v. Lyft, 89 Cal.App.5th 1129, 1133 (2023).

Lyft responded by filing a motion to compel arbitration based on the “Terms of Service” required of its drivers, but the trial court denied the motion, finding wholesale waivers of PAGA claims to be unenforceable under then-controlling state law. Id. at 1133. The Court of Appeal affirmed the denial, and the U.S. Supreme Court granted review in June 2022. Id. The U.S. Supreme Court vacated the judgment and remanded the case for further consideration in light of its recent Viking River decision, which held that employees compelled to arbitrate individual PAGA claims lose statutory standing to pursue representative PAGA actions in court. Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022). The California Court of Appeal then vacated its prior decision and requested further briefing from the parties in light of Viking RiverSeifu, 89 Cal.App.5th at 1134.

On remand, the primary issue remained the arbitrability of individual versus representative PAGA claims. Id. Although the Court of Appeal initially affirmed the denial of Lyft’s motion to compel arbitration, the plaintiff conceded that he was required to submit his individual PAGA claim to arbitration under the terms of the PAGA waiver, so the Court of Appeal reversed the denial of that portion of Lyft’s motion. Id. However, as to representative PAGA claims, the Court of Appeal firmly asserted that it was not bound by the U.S. Supreme Court’s decision in Viking River and that “PAGA standing is a matter of state law that must be decided by state courts.” Id. at 1134.

Declining to follow the U.S. Supreme Court based on authority to adjudicate the matter according to California law, the California Court of Appeal independently assessed PAGA standing requirements by heavily relying on Kim v. Reins International California, Inc., in which the Court defined “aggrieved employee” (for purposes of establishing PAGA standing) using a two-pronged approach: the plaintiff was employed by the alleged violator, and the plaintiff was someone against whom alleged violations were committed. Kim v. Reins Int’l Cal., Inc., 9 Cal.5th 73, 82 (2020).

The Court ultimately held that the plaintiff in Seifu had satisfied the Kim standing requirements to maintain representative PAGA claims. Seifu, 89 Cal.App.5th at 1141. Furthermore, the Court determined this standing to be intact, despite the fact that the plaintiff was required to pursue his individual claims via arbitration. Id. Finally, as a general conclusion, the Seifu court held that a plaintiff retains standing to pursue representative PAGA claims even if their individual PAGA claims are compelled to arbitration. Id. at 1141-42.

It is important to note, however, that Seifu’s validity is subject to change, pending a decision on these issues by the California Supreme Court. Id. at 1134. In fact, the California Supreme Court is expected to make a final ruling on Adolph v. Uber no later than August of 2023. In Adolph, the plaintiff will attempt to convince the California Supreme Court that the U.S. Supreme Court got its Viking River decision wrong – and, that employees do maintain statutory standing to litigate representative PAGA claims on behalf of other aggrieved employees in court, even if they executed binding, individual arbitration agreements. Some California judges have declined to follow the U.S. Supreme Court rationale already. This split will be resolved – one way or another – when the highly anticipated Adolph ruling is decided in the coming months. We are closely monitoring this case and will provide a further update upon its issuance.

Should you have any questions about these new legal developments, please contact the authors or reach out to the Gordon & Rees Employment Team for more information. The team gives special acknowledgment to law clerk Morgan Sellers for his contribution to this update.