September 4, 2024

Diaz v. Macy’s West Stores, Inc.

California’s Private Attorneys General Act (PAGA) permits an “aggrieved employee” to bring a representative action on behalf of current or former employees to recover civil penalties for wage-related violations of California’s Labor Code. In Viking River Cruises, Inc. v. Moriana (2021), the United States Supreme Court recently held that the Federal Arbitration Act (FAA) preempted California law insofar as it prevented PAGA actions from being divided into individual and representative claims and thereby thwarted the enforcement of agreements to arbitrate individual PAGA claims.

Based on Viking River, the defendant moved to compel the arbitration of an employee’s individual PAGA claim and for the dismissal of the employee’s representative PAGA claim. The district court granted the motion as to the individual claim but compelled the parties to engage in the representative arbitration of the representative PAGA claim.

The defendant appealed. The Ninth Circuit affirmed the district court’s order to the extent it compelled the employee to arbitrate her individual PAGA claim and to vacate the order to the extent it required the arbitration of the representative PAGA claim. The Ninth Circuit held that no formulaic use of the word “representative” in a class action waiver is necessary to exclude representative PAGA claims from arbitration.

Although the Ninth Circuit rejected the contention that Viking River imposed a federal rule of decision requiring the dismissal of non-individual PAGA claims, the court allowed the defendant to renew in the district court its FAA preemption challenges to California’s state-law prohibition against the dismissal of such claims.

Horvitz & Levy represented the defendant on appeal.