Supreme Court limits California labor law

In a victory for California employers, the Supreme Court on Wednesday set limits on a state labor law that allows private litigation on behalf of groups of workers even if they had agreed to settle their disputes through individual arbitration.

The majority ruled that the Federal Arbitration Act preempts or overrides state law.

California is the only state that authorizes such private actions as a means of enforcing its labor laws, the judges said. But in doing so, the state allows employees to opt out of the binding arbitration agreements they signed when they were hired, the court said.

The result appears to limit, but not completely block, private lawsuits.

The conservative Supreme Court has repeatedly overruled judges in California who refused to uphold arbitration clauses.

For nearly two decades, judges have steadily closed the door to courts and lawsuits, instead affirming private arbitration as a means of resolving costly disputes, whether they involve banks, credit cards, retail purchases, or the workplace.

In 2004, the California Legislature adopted a different approach to protecting workers’ rights. The Private Solicitors Act states that solicitors can bring claims against an employer seeking penalties on behalf of a group of workers and for multiple violations of the Labor Code. Three quarters of the money collected goes to the state.

Lawmakers said the state’s labor laws would not be enforced even if workers were cheated out of their wages or not paid extra for overtime. They said the state doesn’t have enough in-house staff to police industries where “labor law violations are most prevalent, including agriculture, clothing, construction, car washes and restaurants.”

In challenging the law, a coalition of California employers said the measure encouraged a handful of plaintiffs’ law firms to regularly file full-scale lawsuits accusing a company of multiple violations that affected hundreds or even thousands of employees.

They said companies would be threatened with a costly judgment if they refused to come to an agreement. They also argued that employees should be required to abide by their signed agreements to resolve disputes.

In defense of the law, prosecutors and state judges argued that the lawsuits speak for the state, not for the employees cited as plaintiffs.

The ruling should not affect unions, which often settle disputes on behalf of groups of workers. In this case, both the employer and the employees have opted for arbitration.

The case before the court was Viking River Cruises vs. Moriana. It came about when Angie Moriana quit her job as a Los Angeles sales representative for Viking River Cruises in 2017, claiming she didn’t get her last paycheck on time. She then became the lead plaintiff in a private lawsuit alleging multiple violations on behalf of a large group of Viking employees.

Viking disagreed, saying she and the other employees agreed to arbitrate “any disputes arising out of or relating to your employment.” In addition, they had waived any right to a “class, collective, or private action by the Attorney General.”

But a Los Angeles County Superior Court judge and the state Circuit Court of Appeals refused to block the lawsuit. They said that under California law, the “state is the true party” filing the suit for labor violations.

Viking appealed to the Supreme Court, arguing that California and its state courts refused to honor binding arbitration agreements. Supreme Court limits California labor law

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