The Impact of Viking River Cruises on PAGA Claims: What Happened in Agustin Gutierrez v. Panera LLC


. By Anne Wallace

Order of events and explicit contract language determined result

On October 22, the California Court of Appeal, Second Appellate District held that an employee whose employment agreement explicitly excluded Private Attorneys General Act (PAGA) claims from arbitration, did not have to arbitrate those claims against his employer. The terms of his contract effectively trumped a change in law that occurred after the agreement was made.

The keys to understanding Agustin Gutierrez v. Panera LLC, a California labor lawsuit are: The law governing the intersection of arbitration agreements and PAGA changed significantly with the Supreme Court’s 2022 decision in Viking River Cruises v. Moriana, as Agustin Gutierrez’s claims were pending.


What happened?


When he was hired, Gutierrez agreed to arbitrate his claims against his Panera with a proviso that excluded any PAGA claims from the arbitration process. Disputes arose thereafter, and he filed a California labor lawsuit against his employer. At the time, both parties agreed to arbitrate his non-PAGA claims and litigate his PAGA claims in court. Then, in Viking River Cruises, the Supreme Court fundamentally changed the rules governing the enforceability of arbitration agreements and PAGA claims.

Panera moved to compel arbitration of Guiterrez’s individual PAGA claims, and the trial court granted the motion. However, the Court of Appeal rejected Panera's argument, holding that the specific language of the arbitration agreement:

“Employee may bring or participate in a suit seeking remedies under the Private Attorneys General Act (PAGA) seeking to enforce State rights under the California Labor Code[,]" preserved the plaintiff's right to pursue his PAGA claim in court. The court reasoned that the Federal Arbitration Act (FAA) does not require the enforcement of arbitration agreements that clearly exclude certain types of claims.

For readers who do not spend time pondering the puzzles of arbitration, PAGA and the FAA, there’s a lot to unpack here.


Why workers resist arbitration of employment disputes


On its face, arbitration seems like a good way to resolve employment disagreements. Proponents of arbitration argue that it tends to be cheaper and faster than a labor lawsuit. This is the basic policy that animates the FAA.

On the other hand, however, the process tends to favor employers:


Understanding PAGA


PAGA empowers employees to bring representative actions on behalf of themselves and other aggrieved employees to enforce California labor laws. Plaintiffs essentially act on behalf of the California Labor Commissioner’s Office. Most of the benefit, including penalties assessed on the employer, redounds to the benefit of the Division of Labor Standards Enforcement. This, in turn, is designed to benefit workers who are the “eyes and ears” on the ground and more likely to be aware of labor law infractions.

Employees may recover a smaller portion of civil penalties for labor code violations, even if they have not personally suffered damages. PAGA claims have become a powerful tool for workers to seek justice and deter employer misconduct.


The Viking River Cruises decision


In Viking River Cruises, the Supreme Court held that the FAA requires courts to enforce arbitration agreements, even if they contain class action waivers. This decision raised concerns about the enforceability of PAGA claims, as some employers argued that PAGA claims are essentially class action lawsuits.


Key takeaways from Agustin Gutierrez


There are lessons in this decision for both employers and employees. California employers should review their arbitration agreements to ensure they are compliant with Viking River Cruises and Agustin Gutierrez. They should consult with legal counsel to draft clear and enforceable arbitration agreements that specifically address PAGA claims. Employees should make sure that they understand the terms of the onboarding agreements that they sign. Workers should know their rights under PAGA and, where possible, consult with an attorney to understand their options.

Three issues are particularly important:


California Labor Law Legal Help

If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to an employment law lawyer who may evaluate your California Labor Law claim at no cost or obligation.

READ MORE CALIFORNIA LABOR LAW LEGAL NEWS