SACRAMENTO, Calif. – The U.S. Supreme Court limited the reach of California’s cornerstone employee-protection law on Wednesday – but action by the state legislature could soften the blow.
The court ruled 8-1 that the Private Attorneys General Act, or PAGA, which allows employees to sue their employers on behalf of the state, is superceded by a federal law that requires such private disputes to be settled through arbitration.
California workers often utilize PAGA to win wage-theft cases, and labor advocates call the court’s decision a serious blow.
“If you were anyone pro-labor, pro-employee, look at this as a setback,” labor lawyer Zachary Busey said. “It is, again, a pro-arbitration decision. Even putting aside politics, anything that is pro-arbitration is pro-employer and anything that is pro-employer, by its nature, is not good for the goals that pro-employee organizations are trying to push for.”
PAGA was passed in 2004 in response to high rates of wage theft and the state’s limited capacity to regulate it. The law holds that employees can take labor issues to court, without being forced into private arbitration, even if they signed an arbitration agreement when they started their job.
When employees make PAGA claims, they are representing the California Labor and Workplace Development Agency, or LWDA. If they are successful, they earn 25% of the damages, while the state gets the rest.
The case in question was Viking River Cruises v. Moriana. Angie Moriana was the lead plaintiff in a case against Viking after she said the company was late to receive her last paycheck after she quit the job. Viking held that the plaintiffs were bound to arbitration agreements and thus the lawsuit wasn’t permitted by California state law.
The Supreme Court said on Wednesday that a PAGA claim can be split into two components – an individual claim, and a claim on behalf of other workers. According to the court, a worker with a binding arbitration agreement can be forced into arbitration to settle their own personal case while also pursuing claims as part of a group.
Early internet reactions to the decision implied that the decision would severely limit workers’ ability to avoid the private arbitration process and take their case to court.
But Justice Samuel Alito’s majority opinion, according to labor and employment lawyer Michael Rubin, seemed to assume that if arbitration in the individual case is required, then under state law, the plaintiff does not have standing under PAGA to pursue claims for penalties in the collective action.
This assumption, Rubin said, could end up being false, if California courts or lawmakers say so.
“I suspect that either the courts in California or the California legislature are going to clarify that as a matter of California law… a plaintiff who has standing to represent the LWDA seeking penalties based on violations committed against others doesn’t forfeit that standing simply because the employer is able to compel her to arbitrate one component of that claim,” Rubin said.
And as of Wednesday afternoon, the legislature appeared willing to act.
In a statement, State Senator Dave Cortese, D-San Jose, chair of the Senate Labor, Public Employment and Retirement Committee, wrote that while his office is still studying the court’s ruling, he is “prepared to author legislation to respond.”
Labor organizers react
When workers enter arbitration agreements, according to Jeremy Blasi, General Counsel for UNITE HERE Local 11, they give up the right to take their case before a jury of their peers. Instead, they answer to arbitration companies overwhelmingly dominated by white men.
“There’s fundamental problems with this forced arbitration system,” Blasi said. “It’s fundamentally unfair to workers, because it allows companies who are repeat players in the private court system to have cases heard by private arbitrators who rely on the same companies for their continued business.”
Workers have “much less success” in private arbitration than in court, Blasi said. For labor organizers like him, the conditions of private arbitration mean that regardless of how Wednesday’s decision plays out, the ruling will only further the problem that the system creates.
“You’re having cases decided by people paid for by the employer, and who are overwhelmingly likely to be men and white,” Blasi said. “And that’s just a fundamental problem that this system presents, and the decision today is only going to exacerbate it.”
A handful of labor organizations came out Wednesday afternoon with statements in protest of the decision.
David Huerta, President of SEIU California and SEIU United Service Workers West, wrote that PAGA is a “bedrock” of California labor law enforcement. He stressed that wage theft across the state overwhelmingly impacts those from minority groups, and that the court’s decision makes it harder for workers to recover damages.
“Today’s ruling is another in a long line of U.S. Supreme Court rulings that have tipped the playing field in favor of corporations, billionaires, and employers and against the interests of working people,” Huerta said.
California Attorney General Rob Bonta also weighed in. Bonta, a supporter of PAGA, called the ruling “disappointing.” But he also noted that the ruling doesn’t completely scrap PAGA; rather, it limits it. And according to several legal experts who spoke to the Bee, these limits may have workarounds.
What’s next for PAGA?
Tia Koonse, Labor Center Legal and Policy Research Manager, many people initially assumed that PAGA had been torn apart, it has become clear that legislative action could be an easy fix.
“It seems like the Supreme Court definitely set out a roadmap in this case for employers that enables them to eviscerate PAGA. It does,” Koonse said. “But you’ll notice that there’s a concurring opinion from Justice Sotomayor that made clear that that roadmap is a dead end if the legislature or the courts simply reaffirm that PAGA entitles workers to pursue their civil penalties for all workplace violations.”
Given that most Californians are forced to sign arbitration agreements, and that the state faces high rates of wage theft, Koonse said she expects that legislation to reaffirm its intent would be received well.
“PAGA has been a target of the Chamber of Commerce since it was passed,” Koonse said. “And continually, the legislature upholds PAGA.”
Koonse acknowledged that there isn’t much time left in this year’s legislative session – lawmakers adjourn for summer recess at the end of the month. But “unless we want PAGA eviscerated,” the state will need to act.
Jon Miller, Chief Program Officer of Public Rights Project, also predicts that California will respond accordingly.
“I know that this decision will be carefully scrutinized and reviewed, and however PAGA can continue to be utilized, it’s going to be utilized,” Miller said. “To the extent that there are needed changes or reforms, I’m sure that there will be efforts – legislatively and otherwise – to make those changes.”
