California employers were granted some relief from frivolous lawsuits with the Supreme Court’s recent decision on the state’s Private Attorneys General Act. 

PAGA gives employees the ability to take workplace claims on behalf of the state straight to court instead of arbitration. They can also sue on behalf of other employees, which expands the potential impact and penalties facing employers.

The Supreme Court’s 8-1 ruling on Viking River Cruises, Inc. v. Moriana means, according to the California Chamber of Commerce, that employees who entered a valid arbitration agreement could be made to arbitrate their individual PAGA claims.

The CalChamber released the following statement on June 15 when the ruling was announced:

“The Court has consistently recognized that the Federal Arbitration Act (FAA) preempts California legislation or case law for claims that are subject to an arbitration agreement. As the Court pointed out, California’s PAGA law unduly circumscribes the freedom of parties to determine the issues subject to arbitration and the rules by which they will arbitrate. Businesses, workers and consumers will benefit from this ruling going forward.”

The ruling in Viking River Cruises, Inc. does not invalidate PAGA. Employees who didn’t sign a valid arbitration agreement can still bring Labor Code violations representing themselves and other employees. And as the CalChamber points out, employees with agreements in place can challenge their validity in court. 

The ruling can also have an impact on AB 51, which prohibits employers from requiring arbitration agreements as a condition of employment in California.  The CalChamber and other groups challenged the law, which was supposed to take effect Jan. 1. With the decision in Viking, all eyes are on the Ninth Circuit U.S. Court of Appeals for the next step in the litigation.

The most important step for employers in the wake of this ruling is to talk to their attorneys, especially if they use arbitration agreements or are considering them. 

---

Related blog: PAGA reform closes in on November ballot