Supreme Court Limits Labor Lawsuits Under California Law

On June 15, the U.S. Supreme Court issued a decision that will impose limits on a California labor law that had allowed some workers to file private lawsuits to settle disputes, even if they had previously agreed to address conflicts through arbitration. Only one of the nine justices dissented from the judgement.

The case, Viking River Cruises, Inc., v. Angie Mariana, had questioned whether the Federal Arbitration Act (FAA) requires enforcement of bilateral arbitration agreements stipulating that an employee cannot raise representative claims.

Business groups like the National Federation of Independent Business had argued the Supreme Court should reaffirm the FAA’s protection of individualized arbitration and hold that the FAA preempts California’s state-law rule barring waiver of representative PAGA claims.

The Supreme Court agreed. Calling the ruling a “significant win for employers, one lawyers at Littler explained, the decision could “dramatically impact employers’ rights to enforce arbitration agreements related to claims under California’s Private Attorneys General Act (PAGA).”

The PAGA took effect on January 1, 2004. It allowed for an employee to seek civil penalties against employers on behalf of the state. It also allowed individual employees to bring a claim under PAGA even if other “aggrieved” employees did not participate in the lawsuit. Prior to the enactment of PAGA, such civil penalties could only be assessed and collected by California’s Labor and Workforce Development Agency.

Littler advised companies to examine their arbitration agreements and revise them to permit compelling arbitration of individual PAGA claims, while ensuring the agreement has severability language. Read more here.