A unique California law allowing employees to sue over workplace violations on behalf of the state is partly superseded by a federal law that enforces arbitration agreements, the US Supreme Court held.

The Federal Arbitration Act, which governs private dispute resolution contracts, preempts California’s Private Attorneys General Act to the extent PAGA prevents cases from being divided into individual and group claims through an arbitration agreement, the justices ruled Wednesday. The decision overturned a 2014 California Supreme Court ruling that allows PAGA to circumvent such agreements.

But the Supreme Court said the FAA doesn’t override PAGA’s ban on wholesale waivers of rights under the law.

The U.S. Chamber of Commerce, Uber Technologies Inc., Postmates Inc., and other business groups asked the high court to curb PAGA, saying that it doesn’t jibe with the FAA. Proponents of the state law, including the California attorney general, say it’s an important tool for workers to hold employers accountable.

The law draws thousands of labor challenges to court every year.

The case involves former Viking River Cruises Inc. sales representative Angie Moriana, who sued in 2018 on behalf of hundreds of workers over alleged violations of several provisions of California’s wage-and-hour laws. She waived her right to bring such a suit when she signed...

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