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Justices curb California labor law protecting employees

The high court’s ruling is a win for California employers looking to keep worker disputes in arbitration.

WASHINGTON (CN) — A California labor law permitting lawsuits on behalf of a group of employees was limited by the Supreme Court on Wednesday. 

Under California’s Private Attorneys General Act, employees are allowed to bring class-action suits on behalf of the state against employers who violate the labor code. The 8-1 ruling from the high court limits PAGA if employees have already signed arbitration agreements. 

The case stems from a suit filed by Angie Moriana — a former sales representative — and other employees against Viking River Cruises for failing to pay them appropriately under the California Labor Code. The cruise company argues that she can’t pursue these claims because of an arbitration agreement. Viking is fighting Moriana’s individual claim as well as her ability to file a class action. 

A trial court ruled that Moriana couldn’t be forced into arbitration under California law. The ruling was affirmed by a state appeals court. 

The case was put before the justices in March to decide if the Federal Arbitration Act prevented Moriana from raising class action claims and required the enforcement of arbitration agreements despite PAGA. The high court ruled that it does. 

Justice Samuel Alito said Section 2 of the FAA makes arbitration agreements valid, irrevocable and enforceable. The court interprets Section 2, Alito said, through two clauses that together establish “an equal-treatment principle.” However, Alito said there are causes through which agreements are not enforced. Courts can revoke agreements for contract defenses like fraud, but states cannot make laws discriminating against arbitration on its face. 

“Section 2’s mandate protects a right to enforce arbitration agreements,” the George W. Bush appointee wrote. “That right would not be a right to arbitrate in any meaningful sense if generally applicable principles of state law could be used to transform ‘traditiona[l] individualized . . . arbitration’ into the ‘litigation it was meant to displace’ through the imposition of procedures at odds with arbitration’s informal nature.” 

Moriana argued that PAGA created a single private cause of action but the majority disagreed. Alito said California courts see PAGA as a way to assert the state’s claims on a representative basis.

“California courts interpret PAGA to provide employees with delegated authority to assert the State’s claims on a representative basis, not an individual cause of action,” Alito wrote. “And a PAGA action asserting multiple code violations affecting a range of different employees does not constitute ‘a single claim’ in even the broadest possible sense, because the violations asserted need not even arise from a common ‘transaction’ or ‘nucleus of operative facts.’” 

Alito said the statute’s built-in mechanism that allows several legal claims to be brought together creates a conflict between PAGA and the FAA. 

“This prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate,’ and does so in a way that violates the fundamental principle that ‘arbitration is a matter of consent,’” Alito wrote. 

The lone dissent in the case came from Justice Clarence Thomas who said the FAA should not apply in state court proceedings. 

“I continue to adhere to the view that the Federal Arbitration Act (FAA) does not apply to proceedings in state courts,” Thomas wrote. “Accordingly, the FAA does not require California’s courts to enforce an arbitration agreement that forbids an employee to invoke the State’s Private Attorneys General Act.” 

California’s Attorney General Rob Bonta said PAGA is a critical way the state provides workers with dignity and respect and was disappointed with the court’s ruling. 

“Every worker is entitled to dignity and respect on the job,” Bonta said in a statement. “For decades, PAGA has been a critical part of the state’s efforts to help make that a reality. Whether it’s protecting overtime pay or taking on unsafe working conditions, PAGA strengthens California’s ability to tackle labor violations.” 

Bonta said while the court’s ruling limits PAGA, it does not do away with it completely. 

“While today’s decision is disappointing and adds new limits, key aspects of PAGA remain in effect and the law of our state,” Bonta said. “Workers can continue to bring claims on behalf of the State of California to protect themselves and, in many instances, their colleagues all across California. At the California Department of Justice, we will continue to stand with workers to fight for their rights everywhere.”

Categories: Appeals Employment Law

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