Like most employers operating in California, staffing companies face myriad challenges under the Private Attorneys General Act of 2004 (PAGA)—often with claims from multiple employees stacked on top of each other. This year, the California Supreme Court is addressing three critical PAGA-related questions, each of which will significantly affect how staffing companies approach the litigation and resolution of these claims.

PAGA authorizes an “aggrieved employee” to stand in the shoes of the state of California to initiate an action for civil penalties against his or her employer “on behalf of himself or herself and other current or former employees.” (Cal. Lab. Code §2699[a], [c]) To be considered an “aggrieved employee,” a plaintiff must show that he or she was employed by the employer and allege that he or she suffered one or more of the labor code violations. In other words, the mere act of sustaining a labor code violation by one’s employer (or alleging as much) is sufficient to confer “aggrieved” status on an individual. “Aggrieved” status opens the door to widespread potential penalties—including penalties for labor code violations the “aggrieved employee” did not personally experience.

Yesterday, the California Supreme Court issued its long-awaited decision in Adolph v. Uber, putting to bed any expectation that California employers had that so-called “nonindividual” claims would be dismissed after an individual plaintiff’s claims are compelled to arbitration.

The Supreme Court held that an employee retains standing to pursue nonindividual PAGA claims in court, i.e., on behalf of other employees, even when that employee’s individual PAGA claim is compelled to arbitration. In other words, the court held that while an arbitration agreement may require that the employee submit his or her individual PAGA claims to private arbitration, that employee can continue to pursue nonindividual PAGA claims on behalf of the other employees in litigation.

The practical takeaway from the Adolph decision is that it may not make sense to pursue arbitration of PAGA claims, even when they are covered by a valid arbitration agreement, unless there is a strong reason to do so—e.g., to obtain the dismissal of class claims or perhaps when it is beyond dispute that the employer can prove that the employee did not suffer a single labor code violation during the entire course of his or her employment.

The Supreme Court is also set to answer the question of whether PAGA includes a manageability component in Estrada v. Royalty Carpet Mills Inc. The case is fully briefed, and oral argument will be scheduled for some time in the fall, so a decision should be handed down later this year or in early 2024. At this time, attorneys are still able to raise PAGA manageability arguments in state court—but not in federal courts. Finally, in Turrieta v. Lyft Inc., the Supreme Court is set to answer the question of whether a PAGA plaintiff has the right to intervene, or object to, or move to vacate, a judgment in a related action that purports to settle the PAGA claims that plaintiff has brought. Until the Supreme Court issues its decision, there is conflicting case law on the subject of objectors to a PAGA plaintiff.

Staffing companies should review arbitration agreements, to ensure that they comply with recent case law, and audit wage and hour practices to ensure compliance, avoiding an underlying PAGA violation.