In a much-awaited decision, the Supreme Court of the United States indicated that it would consider whether the Federal Arbitration Act (FAA) preempts California’s rule prohibiting arbitration of Private Attorneys General (PAGA) claims under the California Labor Code. Depending upon the high court’s ultimate ruling, the case has the potential to upend wage and hour litigation in California.
In granting the petition for certiorari brought by Viking River Cruises, Inc., in the case of Viking River Cruises Inc. v. Moriana, the Court has decided to resolve the specific question of whether the FAA “requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.” In other words, if the Court rules in favor of the employer, the case has the potential to permit employers to limit PAGA representative claims by implementing arbitration agreements (with representative and class action waivers) with their employees.
The stakes are enormous. Under current law, employees who allege that they have been subject to violations of the California Labor Code can sue employers on behalf of other allegedly aggrieved parties in representative actions to recover civil penalties against their employers. PAGA civil penalties are awarded per person, per pay period, and may grow exponentially. In most cases, the employees receive little of the recovery, with the majority going to the state and the lawyers who bring the...
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