SAN FRANCISCO (Legal Newsline) - Lyft can’t prevent drivers who use its app from suing under a California labor law that deputizes employees as private attorneys general, an appeals court ruled, opening the ride-hailing service to lawsuits that otherwise would be barred by agreements requiring individual arbitration.
A three-judge panel of the First Appellate Division rejected Lyft’s argument that U.S. Supreme Court precedent prevents California courts from nullifying arbitration agreements that prohibit class actions. California’s Private Attorney General Act allows workers to sue in the name of the state Labor Commissioner, the court ruled, even though the person filing suit stands to collect a share of any winnings.
The decision is consistent with multiple previous rulings by California appeals courts that blunted the effect of the Supreme Court’s 2018 decision in Epic Systems v. Lewis. That decision, along with a ruling in a companion case, Murphy Oil v. NLRB, appeared to protect arbitration agreements even when lawyers argue they violate provisions in labor law guaranteeing the rights of workers to engage in collective action.
Lyft said the Supreme Court effectively reversed a 2014 decision by a California appellate court that outlawed PAGA waivers. In its 19-page decision on Oct. 29, the appeals court noted Lyft was “represented by two prominent law firms,” while Olson was represented by “a well-known appellate boutique.” But despite the efforts of those lawyers, the appellate panel said it didn’t need to analyze Epic Systems because the decision didn’t apply to PAGA claims.
Olson signed a Terms of Service agreement barring him from bringing “a representative action on behalf of others” under the California law. Lyft moved to compel arbitration but a trial judge rejected the company’s arguments, citing the 2014 California decision outlawing PAGA waivers.
The law allows “aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations.” While employees may bring the lawsuits, the court ruled, the California Labor Commissioner remains “the real party in interest.” The statute effectively allows for qui tam actions, where it provides for a penalty and some of that money is shared with the person who brought the suit.
Soon after Epic Systems was decided, a California appeals court rejected comparisons to PAGA actions, finding Epic only applies to employees seeking to bring cases on behalf of other workers. Employees file PAGA claims of the state, not other workers, the appeals court ruled. Several other appellate decisions followed, adopting the same reasoning.
Lyft argued all those decisions were incorrect because the Supreme Court also barred government claims in Murphy Oil, where the National Labor Relations Board was the opposing party. The appeals court said that doesn’t preclude California from prohibiting PAGA waivers because those lawsuits are on behalf of the state, not groups of individual workers.