US Supreme Court deals major blow to California worker class actions

Security fencing is seen outside the US Supreme Court in Washington, DC, US, June 14, 2022. REUTERS / Sarah Silbiger

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  • Federal arbitration law trumps California rule, justices say
  • Ruling will likely stem explosion in worker class actions

June 15 (Reuters) – The U.S. Supreme Court on Wednesday said a unique California law allowing workers to sue their employers in the state’s name does not permit them to circumvent agreements to bring legal disputes into individual arbitration rather than court.

The court’s 8-1 ruling in a case involving Viking River Cruises Inc is a major victory for business groups who had backed the company, and is likely to stem a flood of lawsuits filed in recent years accusing companies of widespread wage law violations.

Justice Samuel Alito wrote before the court that the Federal Arbitration Act, which requires the enforcement of agreements many workers sign to arbitrate legal claims, trumps a rule created by California courts requiring claims brought under the state’s Private Attorney General Act to remain in court.

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Viking River and its lawyers did not immediately respond to requests for comment. Nor did lawyers for Angie Moriana, a former Viking River employee who accused the company of a range of wage-law violations.

PAGA allows workers to sue businesses for violating various state employment laws and keep one-quarter of the damages if they prevail, with the rest going to the state.

The number of PAGA lawsuits filed in California on behalf of groups of workers has skyrocketed since 2014, when the California Supreme Court held that because PAGA plaintiffs step into the state’s shoes, their claims cannot be forced into individual arbitration.

More than half of private-sector workers have signed agreements to bring legal disputes in individual arbitration and refrain from joining class actions, and the Supreme Court in recent years has rejected various attempts by plaintiffs to circumvent them.

PAGA had served as a key avenue to keep class action claims in court in California, which is especially crucial when individual claims would be too small for workers to pursue.

But the Supreme Court on Wednesday said PAGA plaintiffs can only establish standing to sue by first alleging an individual claim; Moriana, for example, accused Viking River of failing to pay her final wages in a timely manner after she quit her job.

And since the FAA requires those individual claims to be arbitrated when workers have signed arbitration agreements, plaintiffs like Moriana cannot tackle claims involving larger groups of workers, Alito wrote.

Viking River had appealed a decision by a California appeals court that said Moriana’s lawsuit could not be forced into arbitration.

Justice Clarence Thomas in a letter dissent said he believed the FAA does not apply to cases brought in state courts.

The case is Viking River Cruises Inc v. Moriana, US Supreme Court, No. 20-1573.

For Viking River: Paul Clement of Kirkland & Ellis

For Moriana: Scott Nelson of Public Citizen

Read more:

Viking River Cruises urges Supreme Court to curb Calif. worker lawsuits

High court will review arbitration exemption under novel Calif. law

Calif. AG tells SCOTUS arbitration exemption key to enforcing labor laws

California’s Private AG Act is a scourge, employers tell SCOTUS

SCOTUS suddenly very interested in California’s Private Attorneys General Act

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Daniel Wiessner

Thomson Reuters

Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.

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