A recent U.S. Supreme Court ruling about a California labor law is being hailed as a victory for companies when it comes to potential legal action from employees.

In an 8-1 decision, the court determined that the Federal Arbitration Act preempts part of the Private Attorneys General Act, a first-of-its-kind California state law that allows employees to bring labor code violations against their employers on behalf of other aggrieved workers. Settlements have cost some retailers millions of dollars in California: a PAGA action against Target over providing seating for cashiers cost the company $9 million in 2018.

Business interests, political advocates and employment law attorneys are still digesting the opinion, which some are calling a mixed decision. But ultimately, the decision could have a widespread effect on California retailers and their workers when it comes to how workplace-wide violations enforced — whether it tamps down the amount of PAGA actions that get filed or whether lawmakers tweak the law around the decision.

What is PAGA?

PAGA is a California law that allows employees to file claims for labor code violations, such as instances where business aren’t complying with wage and hour laws.

State lawmakers passed PAGA nearly 20 years ago to expedite enforcement of its labor code by allowing a worker to act on behalf of state regulators. If they win, the workers keeps 25% of the civil penalties awarded in the case while the rest goes to the state, plus attorneys’...

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