Supreme Court to Weigh State Law That Circumvents Arbitration Agreements

By | December 16, 2021

The U.S. Supreme Court will consider buttressing the power of businesses to funnel employee disputes into individual arbitration proceedings, agreeing to hear a case over a California law that authorizes workers to press group suits.

The justices said Wednesday they will hear an appeal from Viking River Cruises Inc., which contends California courts are letting people circumvent earlier Supreme Court rulings that require arbitration agreements to be honored even if they preclude class actions. Business groups including the U.S. Chamber of Commerce are backing the appeal.

The disputed law, the California Private Attorneys General Act, lets employees file cases that a government official might have pursued, but chose not to. Individuals can sue on behalf of similarly situated people who work for the same employer. Aggrieved workers keep 25% of any penalties collected, with the state getting the other 75%.

The California Supreme Court ruled in 2014 that workers can press a so-called PAGA case even if they previously agreed to send any employment disputes to individual arbitration proceedings.

Viking and other companies say that ruling can’t be squared with U.S. Supreme Court decisions from 2011 and 2018 that said companies can enforce arbitration accords with consumers and employees. Those rulings relied on the 1925 Federal Arbitration Act, which says arbitration agreements must be enforced like any other contract.

The decision to take the case suggests the nation’s highest court, with its conservative majority, is interested in curbing use of the California law. The U.S. Supreme Court had previously turned away similar appeals, but has since been reshaped by the three appointees of former President Donald Trump.

Angie Moriana, a former Viking sales representative, sued the cruise line in 2018 on behalf of hundreds of workers, claiming the company violated several provisions of California’s wage-and-hour laws. She urged the Supreme Court to reject the Viking appeal without granting a hearing.

Supporters say arbitration is cheaper and more efficient than traditional litigation. Critics say companies are trying to strip individuals of important rights, including the ability to band together on claims that as a practical matter are too small to press individually.

The case is Moriana v. Viking River Cruises, 20-1573.

Photo: The U.S. Supreme Court in Washington, D.C., U.S., on Friday, Dec. 10, 2021. The U.S. Senate yesterday passed legislation creating a fast track to raising the nation’s debt ceiling, paving the way for Congress to act next week to eliminate the risk of a U.S. default. Photographer: Stefani Reynolds/Bloomberg

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