Marking a significant win for Californian businesses, the Supreme Court’s decision in Viking River Cruises vs. Moriana will allow employers to enforce arbitration agreements when dealing with claims under California’s Private Attorneys General Act (PAGA).

“The U.S. Supreme Court delivered a stunning victory to employers seeking to enforce employment agreements requiring that their employees arbitrate on an individualized basis,” said Richard Silberberg, an attorney with law firm Dorsey & Whitney in New York City.

Previously, the California Supreme Court, in Iskanian vs. CLS Transportation Los Angeles, LLC, ruled that employers could not enforce arbitration agreements that require employees to arbitrate their PAGA claims individually. Leading to companies having to decide to arbitrate all or none of claims on a PAGA case.

In the recent ruling, the Supreme Court found that requiring arbitration for the individual and all other aggrieved employees is in violation of the Federal Arbitration Act (FFA). Additionally, they found that in arbitration, the individual did not have the foundation to include the non-individual claims because it expands the scope of the arbitration agreement. Therefore, the non-individual claims must be dismissed.

For PAGA, the ruling means that parties can decide what issues they want to arbitrate on, the built-in claim joinder conflicts with the FFA, if an employee has signed an arbitration agreement, the waiver must be upheld in PAGA claims, and employees that have signed such an agreement can still bring claims to court under PAGA as a part of a class of workers.

The California Fair Pay and Employer Accountability Act (CFPAA) — which aims to reform PAGA — is expected to verify sufficient signatures to qualify for the 2024 ballot.

CFPAA’s Executive Committee responded to the court’s action: “Even with the SCOTUS ruling on Viking River Cruises, PAGA will still be an avenue for shakedown claims against businesses where trial attorneys take a huge portion of the recovery, leaving employees with a reduced amount. This is especially the case with anticipated efforts by various legislators to undermine the SCOTUS decision before this session is over.”

The statement continued that the Supreme Court ruling adjust only a section of PAGA and the coalition “remains committed to seeing this initiative passed.”