June 2022 Court Decisions Shape the Future of Labor and Employment Defense Litigation

June 2022 was a key month for employers with decisions in the highly anticipated Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022) as well as Johnson v. WinCo Foods, LLC, 37 F.4th 604 (9th Cir. 2022) and Grande v. Eisenhower Med. Ctr., No. S261247, 2022 WL 2349762 (Cal. June 30, 2022).

The Supreme Court in Viking River Cruises, Inc. held that the Federal Arbitration Act “preempts the rule of Iskanian insofar as it precludes division of Private Attorneys General Act (“PAGA”) actions into individual and non-individual claims through an agreement to arbitrate.” This ruling changes how we view PAGA. For the past eight years, Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) held that arbitration agreements waiving the right to bring PAGA representative actions (that is, splitting PAGA actions into “individual” and “non-individual” components) are unenforceable. Courts consistently upheld the Iskanian ruling by rejecting employers’ efforts to compel representative action waivers in employment arbitration agreements. 

PAGA does not allow a court to determine non-individual PAGA claims once the individual claims have been committed to a separate proceeding. PAGA’s standing requirement requires that a plaintiff only has standing to maintain non-individual PAGA claims in an action where the plaintiff also maintains an individual claim. Once a plaintiff lacks statutory standing to continue to maintain non-individual claims in court, the remaining claims should be dismissed, as seen in Viking River Cruises, Inc.

Employers should take advantage of the well-earned win and review their current arbitration agreements to make possible changes. Employers who did not previously have an arbitration agreement in place may want to use this opportunity to draft and implement one. While this decision is a long-fought achievement, employers should continue to watch for possible legislative action and future court decisions that will continue to shape PAGA’s enforcement.

Second, Johnson v. WinCo Foods, LLC brought employers another triumph when the court held that an employer is not obligated to compensate prospective employees for time and expenses to take a mandatory drug test. In this case, the Court found that the “class members did not become employees until they satisfied the condition of passing the preemployment drug test.” The Court further explained that “[d]rug testing, like an interview or preemployment physical examination, is an activity to secure a position, not a requirement for those already employed.”

Employers may want to apply this case beyond mandatory drug testing, as the holding could reasonably be extended to other preemployment activities. This decision provides further confirmation that an offer and acceptance of employment does not automatically create an employment relationship if there are still requirements (like a mandatory drug test) to secure the position.

Finally, Grande v. Eisenhower Med. Ctr. is an important reminder for employers to draft releases and settlements with great care.  The Courtheld that res judicata did not bar claims in a class action against a hospital, where a staffing agency had previously entered into a class action settlement agreement, but that agreement did not explicitly release the hospital from all related claims. This decision illustrates the importance of carefully drafting settlement agreements to ensure that every intended party is precisely named. Consult with experienced Tressler employment attorneys for the latest updates.

For more information about this article, contact Tressler attorney Cayla Whitley at cwhitley@tresslerllp.com.

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