As we previously reported ( link) the United States Supreme Court very recently issued its long-awaited decision holding that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA). The ruling, which is now the law of the land, is a big victory for employers across the country. Just over two years ago, we wrote about the California Supreme Court’s opinion on workplace “suitable seating” requirements.

However, the Supreme Court’s class action ruling does not affect the rights of California employees to mount a class action-like collective action under the state’s Private Attorneys General Act (“PAGA”). That’s because the California Supreme Court’s Iskanian decision (in 2014) specifically stated that employers may not force employees to arbitrate these PAGA claims.

By now, many are familiar with the ramifications of PAGA. It allows an “aggrieved employee” or their lawyer to bring a lawsuit against an employer for Labor Code penalties on behalf of current and former employees (similar to a class action, but without many of the formalities of a class action). PAGA claims can be very costly. Call it a coincidence that “PAGA” also translates from Spanish to English to mean “pay.”

Last week, a federal court allowed the application of a PAGA claim to an area of employment law we previously wrote about – suitable seating. Just over two years ago, we wrote about the California Supreme Court’s opinion on workplace “suitable seating” requirements ( link). The court provided several “factors” to determine when a suitable seat must be provided, and much ambiguity remained on how these types of cases would be decided.

In a case involving mega-retailer Costco, the Court of Appeal ruled that a PAGA penalty claim could proceed to trial, even though the employees had signed an arbitration agreement. In July 2013, an employee of Costco filed a lawsuit claiming that her employer failed to provide seating to its “Member Service Assistants” who work at the entrance and exit doors. The employee’s suitable seating claim included a PAGA claim on behalf of nearly 1,000 employees. Costco argued to the court that the employee should be allowed to proceed only on her own individual claim, as opposed to a “representative action” (PAGA claim). The appellate court rejected that argument and allowed the case to proceed as a PAGA representative action on behalf of all current and former employees within the applicable statute of limitations period.

What this means for employers?

This new ruling in the Costco case is a stark reminder that suitable seating cases are alive and well in California and that employers will continue to face PAGA exposure in these types of cases despite last month’s Supreme Court ruling permitting employers to force employees to sign arbitration agreements containing “class action” waivers.

What employers should do?

On the suitable seating issue, employers should immediately review what job duties are performed while standing, and assess whether suitable seats must be provided. Since the burden falls on the employer to prove its case, employers should begin the analysis with the assumption that suitable seating must be provided, unless the employer determines that a suitable seat absolutely cannot be provided.

In regard to Arbitration, including a class action waiver, employers should study the pros and cons of having such an agreement with labor counsel before implementing such an agreement.

If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700, or visit us online at www.brgslaw.com.

Richard S. Rosenberg