California employers last week received some relief from PAGA, the state law that many businesses like to hate when the U.S. Supreme Court overturns an important part of the controversial act.
PAGA, or the Law on Private Advocates, is unique to the state and replaces employees suing their employers for violations of the labor code, which are usually handled by state regulators. Many companies claim that because of PAGA, one violation can cost them hundreds of thousands or even millions of dollars instead of thousands.
The Supreme Court ruling comes from decision 8-1 in the Viking River Cruises v. Moriana case, which affirms the right of employers to use internal arbitration agreements to settle disputes with employees instead of turning those disputes into costly PAGA cases.
Angie Moriana, former sales representative of Viking River Cruises Inc. in Woodland Hills, has filed a lawsuit against PAGA, alleging violations of several California labor codes. Moriana’s employment contract contained a provision for resolving disputes through arbitration, not litigation. Viking’s proposal for compulsory arbitration was initially rejected on the precedent that PAGA’s claims could not be compelled to arbitrate under state law.
An important factor in the court’s decision was the Federal Arbitration Act, which provides the opportunity for judicial facilitation in resolving private disputes.
“From today, PAGA’s arbitration agreements on an individual basis will be enforceable under the FAA,” Thean Evangelis, co-chair of the global litigation at Gibson Dunn in Los Angeles, said in a statement. “Depending on the language of their specific arbitration agreements, many PAGA claimants will be forced to turn to individual arbitration after this decision and the result should be the rejection of the rest of PAGA’s non-individual claims.
The June 15 decision is seen as a victory for local business groups, especially the San Fernando Valley-based California Business and Industry Alliance or CABIA. The group, founded by Tom Manzo, was created to lobby explicitly against PAGA. He presented a friendly act in support of the company involved in the case.
Manzo said that according to PAGA, you are always forced to settle these types of lawsuits. So now I think that if it can just be between the dissatisfied employee and the employer, so be it. ”
Manzo added that in addition to the financial and time commitments companies need to take legal action at PAGA, another consequence comes in the form of stricter work cultures.
“Imagine if you are someone who has been working for a company for years and suddenly you have to have your lunch five hours ago (work) and you don’t do it several times in a row. You’re being fired now, “Manzo said, adding that the theoretical employer had taken a tougher stance to avoid PAGA’s claim.
“This is the opposite of a flexible workplace,” Manzo said.
One of the few local companies supported by CABIA is Town & Country Event Rentals, located in Van Nice.
Town & Country President Richard F. LoGersio said his business has spent millions of dollars fighting and settling about 25 PAGA cases in the past few years, one of which led to a $ 900,000 deal.
“I just settled on a bunch of fake claims from PAGA (s) and I had to write a settlement check for $ 75,000 this morning,” LoGersio said last week, adding that his business has arbitration agreements when it comes to hiring.
“I think it will be better (with the decision). But it’s still ridiculous. “
However, the victory for employers is not necessarily unequivocal, as the history of PAGA is far from over, according to Todd B. Sherwin, regional managing partner at Fisher & Phillips LLP in Los Angeles.
“I think the reaction of everyone on their knees when you read the decision curriculum was that this is a huge victory for employers. And this is a victory for employers, but there are still battles and nuances that need to be fought along the way, “he said. “This includes whether the state legislature will do something to amend the statute or reconsider something based on the agreed opinion that was written here.
Sherwin said Judge Sonia Sotomayor’s concerted opinion essentially gave the California legislature a roadmap for changing who is subordinate to PAGA, a point echoed by Lara Short, who heads the Los Angeles-based labor and practice group. Angelis Michelman & Robinson.
Schorz said the decision was not such a big blow to workers, noting that PAGA’s successful claims did not provide huge sums of money – at least to employees.
“The injured employees themselves are not really recovering much, as most of the money goes to the state,” Shortz said. “So PAGA alone does not provide a great opportunity for workers to recover money that is claimed to be theirs; I think this is really a mechanism for reimbursing large attorneys’ fees. “
She added that after the decision there will be a lasting effect of legal and legislative actions.
Scott Nelson, a lawyer for the Public Citizen Litigation Group representing Moriana, reiterated Sherwin’s views in a statement to the Business Journal. Nelson and his team said they were disappointed with the decision, but Sotomayor’s consensus was important.
For now, the ruling will allow for the application of arbitration agreements that prohibit the arbitration of PAGA’s claims for sanctions for violations suffered by other employees, but as Judge Sotomayor suggests, California may be able to defend its ability to ensure that these claims can be tried by clarifying its current law, “Nelson wrote, adding that the ruling was not an unequivocal pro-arbitration award.
Judge Clarence Thomas, the only dissident, reiterated that the FAA does not apply to state proceedings.