The U.S. Supreme Court on Wednesday ruled that a California state law that forces certain employment disputes into state courts did not apply to a case involving a former employee and a cruise line.
Some employers ask employees to sign mandatory arbitration agreements — clauses which keep labor disputes out of state courts and instead place the proceedings before private arbitrators. California law discourages that practice and even says those agreements are not always enforceable against employees.
However, the justices of the Supreme Court ruled on Wednesday that a federal law preempted the California law in question.
The California law is called the Private Attorneys General Act (PAGA). It says individual employees may act as “private attorneys general” by bringing private lawsuits against employers on behalf of both the entire workforce and the State of California. The idea essentially gives private parties the power to enforce the state’s labor laws without tying up the state’s own legal forces.
PAGA also allows plaintiffs who sue on behalf of other employees to have their claims heard in court — a direct contradiction with arbitration clauses that oftentimes prohibit representative actions.
On Wednesday, the Supreme Court ruled in Moriana v. Viking River Cruises that the Federal Arbitration Act (FAA) preempted PAGA’s provision against dividing PAGA actions into individual claims.
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