California’s former labor secretary said it doesn’t work. A ballot initiative is attempting to remove it by a vote of Californians. Now, the United States Supreme Court is deciding whether to handicap the Private Attorneys General Act of 2004.
The law allows individual employees to file labor lawsuits against their employers on behalf of themselves, other employees and the state of California. Previously, the California Labor Commissioner was responsible for filing those claims.
The question in Viking River Cruises, Inc. v. Angie Moriana is whether The Federal Arbitration Act preempts PAGA. If the Supreme Court agrees it does, California businesses would have the option of keeping mandatory arbitration clauses in their work contracts, which would kill PAGA claims before they began.
“The outcome here is controlled by this Court’s decisions in Concepcion, Epic and Lamps Plus. After those decisions, a state is not free to simply declare that a state statute is too important to be relegated to bilateral arbitration,” began Paul Clement, the former Solicitor General of the United States who now works at Kirkland & Ellis, LLP, and who represented the business bringing the case to court.
The state’s lawyer claimed the court’s prior decisions don’t conflict with PAGA.
“Viking’s employment contract with Ms. Moriana explicitly prohibits private attorney general actions and representative actions. As Viking puts it, it targets PAGA claims by name. The Federal Arbitration Act does not require enforcement of such an agreement and does not conflict with the anti-waiver rule. California’s anti-waiver rule is not preempted by the FAA,” said Scott Nelson, of Public Citizen Litigation Group, representing the employee and plaintiff, Moriana.
Some justices responded that PAGA is in line with existing law.
“This is the state’s claim. And all that the state has done is that, instead of doing that itself, it has enlisted private attorneys general. We know governments do this all the time. We had a case yesterday where the U.S. Government does it, not maybe in the exact same way, but the idea of enlisting private attorneys general is a very old one,” said Associate Justice Elena Kagan.
Clement said about 17 PAGA claims are filed every day in California.
Chief Justice John Roberts seemed to question the usefulness of PAGA.
“What (does Nelson) have to say to (Clement’s) point that all that you’ve gotten rid of in PAGA actions are the things that were helpful or favorable to the defendant, you know, the adequate representation, common questions of law or fact?” Roberts asked.
Whatever the Supreme Court decision is, PAGA is a contentious issue in state and local law as well. The act causes small issues to become million dollar liabilities, said William Tooke, who works for mid-sized businesses as a partner at Mirau, Edwards, Cannon, Lewin & Tooke, LLP, and is this year’s Redlands Chamber of Commerce president.
“These are cases where employers hand out hundreds of thousands of dollars so they don’t end up with a multi-million dollar liability,” Tooke said.
The law has structural issues, because the fee for an inadvertent mistake is multiplied across the business’s employees, individual plaintiffs effectively become class representatives without the certification process required in class-action cases and because it puts businesses in a position where they have to quickly settle, Tooke said.
The issues that plaintiffs bring through PAGA claims can be better settled through arbitration, where a check can be quickly cut, instead of a lengthy companywide lawsuit, Tooke said.
Supporters of the bill say PAGA is one of the few options for aggrieved employees.
“There will be less enforcement, less worksitewide relief, more employers will be able to commit wage theft,” if PAGA is repealed entirely, Mariko Yoshihara, legislative counsel and policy director at the California Employment Lawyers Association, told Follow Our Courts.
Yoshihara was referring to an upcoming ballot initiative in California to completely do away with PAGA and replace it with enforcement through the Labor Commissioner.
A steep rise in PAGA claims recently, which Tooke also mentioned, was due to a rise in forced arbitrations, which limit workers’ options when facing wage theft, Yoshihara said. The courts are backlogged, forced arbitrations usually work for the employers, and PAGA cases are the only options left, Yoshihara said.
The upcoming ballot initiative to repeal PAGA, which is still gathering signatures, is supported by David Lanier, the former California Secretary of Labor. Lanier described PAGA as an experiment in cost-saving at the Labor Commissioner’s office during Gov. Gray Davis’ leadership which is no longer needed.
“Workers do far worse under PAGA and far better in the Labor Commissioner’s hands,” Lanier said.
The Labor Commissioner’s office now has the funding to enforce workplace laws, Lanier said.
Parties
Emil Davtyan of Davtyan Law Firm, Kevin Barnes and Gregg Lander of the Law Offices of Kevin T. Barnes represented Moriana before the Los Angeles Superior Court, the California Supreme Court and the California Court of Appeal, Second District, Division Three. Douglas Wickham and Ian Maher of Littler Mendelson, P.C. represented Viking River Cruises at the same levels.
Los Angeles Superior Court Case No. BC687325
Court of Appeal Case No. B297327
California Supreme Court Case No. S265257
Supreme Court Case No. 20-1573
Read the opinion from the California Appellate Court here.
Read the oral argument here.
