California court finds Uber’s PAGA waiver unenforceable

In an unpublished opinion issued this month, a California appeals court declared unenforceable Uber’s arbitration provision requiring drivers to waive the right to bring a collective action under the Private Attorneys General Act (PAGA). At issue was an Uber agreement requiring its drivers to enter into before using the Uber App to pick up riders, and an arbitration provision within the agreement which required the drivers to waive any right to bring a PAGA representative action. Although PAGA applies only to “aggrieved employees,” the plaintiff contended that he and other drivers were employees who had been misclassified as independent contractors.

The court of appeals rejected Uber’s argument that the threshold question of whether the drivers were misclassified was arbitrable, notwithstanding the California Supreme Court’s ban on PAGA representative action waivers, following several prior court decisions on this subject. A PAGA claim is indivisible and belongs to the state, according to the court, with the private litigant stepping in the shoes of the state as a private attorney general. Therefore, employees may not be forced to arbitrate whether their claims fell within the parameters of PAGA before proceeding with a representative action. Bottom line: PAGA representative action claims are not in any fashion subject to arbitration, so employers must be prepared to deal with PAGA litigation.