SCOTUS Considers California Arbitration Case Involving PAGA

WASHINGTON, DC - FEBRUARY 28: (LR) Supreme Court Chief Justice John Roberts, Supreme Court Associate Justice Anthony Kennedy, Supreme Court Associate Justice Stephen Breyer, Supreme Court Associate Justice Sonia Sotomayor and Supreme Court Associate Justice Elena Kagan look on as US President Donald to Trump addresses a joint session of the US Congress February 28, 2017 in the US Capitol House of Representatives in Washington, DC. Trump card

Associate Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

California employers seeking to resolve employee disputes through arbitration face formidable obstacles before Supreme Court judges Stephen Breyer, Sonja Sotomayorand Elena Kaganwhile the court’s liberal trio continue to raise difficult questions about the fairness of forcing labor disputes out of the courtroom and into arbitration.

The Supreme Court heard hearings on Wednesday Viking River Cruises, Inc. vs. Morianathe latest from several cases Raise questions about the rights of employees to sue their employers in court, even when those employees have agreed in employment contracts to arbitrate any claims.

the California’s Private Attorneys General Act of 2004 (PAGA) allows individual employees to act as “private attorneys general” by filing private lawsuits against employers on behalf of the entire workforce and the State of California. The law can provide workers with a valuable tool in enforcing state labor laws, but when individuals are prevented from pursuing PAGA claims through arbitration agreements, they can find themselves in a legal impasse. This is because representative actions—those in which a single plaintiff brings claims on behalf of other similar plaintiffs—are generally not allowed in arbitration.

plaintiff Angie Moriana is a former sales representative for Viking River Cruises. She agreed in her employment contract that any disputes arising out of her employment would be subject to arbitration and that she would waive the right to bring a “representative” labor claim against Viking.

Moriana then filed a labor lawsuit under PAGA, which allows employees to seek civil damages on their own behalf, on behalf of other employees, and on behalf of the state itself. Viking moved that Moriana’s lawsuit be dismissed on the basis of the arbitration clause, and Moriana argued that any waiver of the right of action violated California public policy.

Both the trial court and the California Court of Appeals sided with Moriana, arguing that her individual arbitration agreement did not apply because her claim was brought in a representative capacity on behalf of the state.

“Because Moriana was not acting as a representative of the state when she agreed to arbitrate claims arising out of her employment, there is no agreement that would bind the state to arbitration, even as to arbitrability,” the California Circuit Court of Appeals said wrote.

Viking appealed to the Supreme Court. fight that “there is no doubt as to the importance and recurring nature of the subject”. Viking claims that due to recent precedents, an enormous number of California employers are “facing an onslaught of PAGA representative claims that have exploded in number.”

During Wednesday’s arguments, the court’s liberal wing urged Viking’s attorney to Paul Clemens, on the overall fairness of his client’s position. Because class actions and other representative actions generally cannot be arbitrated, a ruling in Viking’s favor could mean that Moriana and other similar plaintiffs would no longer have a forum to air their grievances.

Kagan commented that California’s decision to allow individuals to make wage and hour claims against employers under PAGA was a deliberate mechanism by California to enforce its labor laws. Individual workers would otherwise be unlikely to pursue claims for minor violations by employers, and the state lacks the resources to prosecute every violation; Therefore, Kagan said, allowing workers to make representative claims on behalf of worker groups as well as the state itself becomes an important means of holding employers accountable for their labor practices.

Kagan framed the concern as one of state sovereignty, telling Clement, “Essentially your position says, ‘You know the state just can’t make that decision, even though that’s the way the state decided that that best serves its sovereign interests.’”

Clement argued that without a verdict in his client’s favor, “arbitration will wither on the vine.” However, Breyer was not convinced.

“I hate to say it, it reminds me of Catch-22,” Breyer said. He went on to characterize the conundrum created by Viking’s attempt to hold Moriana to an arbitration agreement, even for claims unfit for arbitration.

“You have agreed to go to arbitration, but you cannot go to arbitration, so you cannot agree to go to arbitration, but because you have agreed to go to arbitration, you cannot go to court ‘ he said incredulously.

Sotomayor continued to press Clement and said, “I have a number of issues with all of your responses.” The judge continued, noting that arbitration could be compatible with complex cases as the court has allowed arbitration in RICO, securities, antitrust and sexual harassment cases.

However, Sotomayor returned the colloquium to California’s right to enforce its own labor laws. Sotomayor pointed out that “any individual employee will have no financial incentive to bring these lawsuits on behalf of the state.” to destroy, isn’t it?”

As a lawyer Scott Nelson Arguing on behalf of Moriana, he faced an unusual analogous hypothesis from Breyer. The judiciary asked if the California legislature amounted to placing a spider alongside certain claims and then legislating that nothing could be arbitrated with a spider.

“I think we’d have to go back and see if they put the spider on it to be hostile to arbitration,” Breyer explained. He suggested that if PAGA were adopted to intentionally shield cases from arbitration, it might not be enforceable, but if it applied generally, the outcome would be different.

Kagan asked Nelson how it would affect other representative litigation, such as shareholder or ERISA claims, if the court were on Viking’s side. Nelson responded that if his client is not allowed to hear her claim, such lawsuits could be severely curtailed.

Kagan added, noting, “If Mr. Clement has his way, we can obliterate these suits completely.”

In rebuttal, Clement argued that the case was merely an outlier based solely on quirks in California law. Under PAGA, Clement argued, “Everything applies to the entire workforce.”

“It doesn’t make sense,” he continued, adding, “There’s a reason this happened in California.”

You can listen to the full oral presentations here.

The parties’ lawyers did not immediately respond to requests for comment.

[Photo by Alex Wong/Getty Images]

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James Brien

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