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Supreme Court Set to Decide Whether Epic Systems Extends to PAGA Representative Claims

More than three years after its landmark decision in Epic Systems Corp. v. Lewis, the United States Supreme Court has granted certiorari in Viking River Cruises, Inc. v. Moriana to determine whether Epic Systems extends to arbitration agreements that include waivers of representative actions brought under the California Private Attorneys General Act (PAGA).

Employers with operations in California, who have been plagued by the filing of boilerplate PAGA actions, could be heard to breathe a sigh of relief.

PAGA is a unique statute that allows a single employee to file suit on behalf of all allegedly “aggrieved employees” for purported violations of California’s Labor Code and seek enormous penalties – and enormous attorneys’ fees – without having to go through the procedural requirements to proceed as a class action.

As we previously discussed, in Epic Systems, the Supreme Court delivered a tremendous victory to employers facing wage-hour class actions by upholding the use of class action waivers in arbitration agreements.  But whether such agreements are enforceable as to PAGA claims has been a hotly contested issue in California.

Before Epic Systems, and especially after the Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion, employers in California have increasingly used arbitration agreements with provisions whereby employees waive their right to bring or participate in not only class actions, but also PAGA representative actions.

In 2014, after Concepcion was decided, the California Supreme Court in Iskanian v. CLS Transp. Los Angeles, LLC held that, despite Concepcion’s essential holding that courts may not disregard or reshape traditional individualized arbitration, PAGA representative action waivers were not enforceable under California law.  Since Concepcion, multiple employers facing PAGA actions have argued that Iskanian runs afoul of Concepcion, going so far as petitioning the U.S. Supreme Court for writs of certiorari to decide the issue.  Those petitions were repeatedly denied.

Based on language in Epic Systems reaffirming the individualized nature of arbitration, employers have continued to argue that representative action waivers must be enforced according to their terms.  However multiple courts in California, as well as federal district courts following Ninth Circuit precedent, have rejected those employers’ contentions, adhering time and again to Iskanian.

But multiple judges in the Ninth Circuit have noted the tension between Epic Systems and Iskanian.  It appears the U.S. Supreme Court has now noticed that tension, too.

In September 2020 in Moriana v. Viking River Cruises, Inc., the California Court of Appeal followed Iskanian in holding that, despite Epic Systems, representative action waivers in arbitration agreements are still not enforceable.  Viking River petitioned the California Supreme Court for review but that petition was denied.  In May 2021, Viking River petitioned the U.S. Supreme Court for review – a petition that was supported by multiple amici curiae.  And on December 15, 2021, that petition was granted.

The Supreme Court’s decision to hear Viking River would seem likely to resolve the current dispute regarding the enforceability of representative action waivers.  It would provide some much-needed guidance to employers across California.  And because other states are considering enacting legislation similar to California’s PAGA, the impact of the Supreme Court’s decision in Viking River may well extend beyond California.