In June 2022, the United States Supreme Court issued its decision in Viking River Cruises, Inc. v. Moriana, a case that significantly reshaped the relationship between California’s Private Attorneys General Act (PAGA) and the Federal Arbitration Act (FAA). Although the decision is now several years old, it continues to influence how employers draft arbitration agreements and how courts evaluate the arbitrability of PAGA claims.
PAGA allows an “aggrieved employee” to bring an action on behalf of the State of California to recover civil penalties for Labor Code violations. California courts have long described PAGA actions as representative in nature, with the employee acting as a proxy or agent of the state rather than asserting purely individual claims. Before Viking River, the California Supreme Court’s decision in Iskanian v. CLS Transportation held that pre-dispute waivers of PAGA claims were unenforceable and that PAGA claims could not be split into individual and representative components for purposes of arbitration.
In Viking River, the U.S. Supreme Court addressed whether that framework conflicted with the FAA. The Court rejected the argument that PAGA claims are simply a form of class or collective action, but it also rejected the notion that PAGA creates a single, indivisible claim. Instead, the Court focused on PAGA’s unique structure, which allows an employee to pursue penalties for violations personally suffered as well as penalties tied to violations affecting other employees.
The Court held that the FAA preempts California’s rule prohibiting the division of PAGA actions into individual and non-individual claims when the parties have agreed to arbitrate. As a result, an employer may compel arbitration of an employee’s “individual PAGA claim,” meaning the claim based on Labor Code violations allegedly suffered by that employee, if the arbitration agreement so provides. To that extent, the Iskanian rule barring such division was found to interfere with the FAA’s core principle that arbitration is a matter of consent.
At the same time, the Court made clear that wholesale waivers of PAGA claims remain unenforceable. The FAA does not require enforcement of agreements that eliminate an employee’s ability to act in a representative capacity on behalf of the state altogether. The key distinction drawn in Viking River is between waiving representative standing entirely, which remains prohibited under California law, and agreeing to arbitrate only the employee’s individual PAGA claim, which the FAA protects.
The practical consequence of this holding was significant. Because PAGA’s standing requirements tie an employee’s ability to pursue non-individual PAGA claims to the presence of an individual claim in the same action, the Court concluded that once the individual PAGA claim is compelled to arbitration, the employee generally lacks statutory standing to pursue the remaining non-individual claims in court. In Viking River itself, that meant the representative PAGA claims were subject to dismissal.
Justice Sotomayor, concurring, emphasized that California courts and the Legislature retain authority to clarify or modify PAGA’s standing rules if they choose to do so within constitutional limits. Since the decision, California courts and lawmakers have continued to grapple with how PAGA operates in a post-Viking River landscape, including questions about standing, severability, and pleading strategies.
For employers, Viking River underscores the importance of carefully drafted arbitration agreements. Agreements that include enforceable provisions requiring arbitration of individual PAGA claims, along with appropriate severability clauses, may significantly limit exposure to broad representative PAGA actions. At the same time, the decision does not eliminate PAGA liability or enforcement risk, nor does it permit employers to contract away compliance with the Labor Code.
Ultimately, Viking River Cruises v. Moriana represents a recalibration rather than a dismantling of PAGA. It reinforces the primacy of the FAA in enforcing arbitration agreements while preserving California’s policy choice to allow private enforcement of labor laws on behalf of the state. Employers should view the decision as one piece of an evolving legal framework and regularly review their arbitration agreements and compliance practices in light of continuing developments.