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  • Writer's pictureAnthony J. Nunes

Supreme Court Drops Anchor on California Workers

The Supreme Court’s Viking River Cruises held that that the Federal Arbitration Act (a 1920’s law to help enforce arbitration of business conflicts) preempts California’s Private Attorney General Act (“PAGA”) that has allowed workers to hold employers accountable for workplace-wide violations.

The California’s Supreme Court in Iskanian had recognized that a worker who brings a PAGA action is doing so on behalf of the state. Since California is not a party to any arbitration provision, the worker’s PAGA claims could not be sent to arbitration. This was an important tool to root out labor code violations and proved a major deterrent to wage theft.

For decades corporations have been working to limit employee lawsuits through class action waivers and forced arbitration provisions. The forced arbitration provisions and class action waivers are ubiquitous in employment contracts. Usually, they are buried in a packet of documents when a worker starts a job and hidden in fine print. In arbitration, employees lack the protections of being in court, including right in discovery and the right to appeal the arbitrator’s decision.

Viking River Cruises argued that because their arbitration agreement included a class action waiver, they could force workers to waive any ability to bring a PAGA claim for violations that affected other workers. Under PAGA, the PAGA claims cannot be split up from the underlying individual labor violation claim. The Supreme Court held this means PAGA had coerced employers into giving up their right to arbitrate their PAGA claims on an individual basis and thus the FAA preempted PAGA.

Fortunately, the Supreme Court left some room for California to have sovereignty over its own labor laws by making changes to PAGA. Justice Sotomayor concurring opinion proposed that California courts or the state legislature can clarify that workers may still litigate their non-individual claims even if their individual PAGA claims are sent to arbitration.

Sotomayor notes that the Court's reasoning for dismissing PAGA claims rested on Court's view that PAGA does not provide a plaintiff standing to move forward with those claims while the name plaintiff pursued his or her own individual PAGA claims in arbitration. So if the state legislature clarified that Court's view of PAGA standing is wrong, then dismissal of the PAGA might not be required. Or the legislature could also try to amend PAGA to give the plaintiff standing to move forward with those claims.

California’s state legislature need to clarify PAGA and leave room for mistreated employees to act collectively to keep employers honest.

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