Since the mid-1980s, corporations have been laser-focused on gutting workers’ ability to enforce fundamental workplace protections in courts. On Wednesday, the Supreme Court handed them a big win—albeit one that holds out a glimmer of hope for states seeking to enforce their laws.
In Viking River Cruises, Inc. v. Moriana, the court held that the Federal Arbitration Act—a 1925 law intended to aid enforcement of contracts to arbitrate conflicts between businesses in commercial transactions—preempts a California rule that has allowed workers to hold lawbreaking employers accountable for workplace-wide violations before judges and juries. The decision represents yet another blow to workers from a Supreme Court dominated by corporate interests.
How did we get here? Decades of underfunding and understaffing left federal and state agencies unable to fully enforce labor standards. Employers took advantage of a deregulated economy, and wage theft was at epidemic levels throughout the country in the 2000s. One study found that 26 percent of low-paid workers in three cities were paid less than the legally required minimum wage, that 19 percent had unpaid or underpaid overtime violations, and that 68 percent had experienced at least one pay-related violation in the previous week. Another study estimated that employers stole $50 billion per year from workers’ wages.
In response to the labor standards underenforcement crisis, California passed the Private Attorneys General Act (PAGA), the law at the heart of Viking River Cruises. As several amicus briefs in the case highlighted, PAGA was enacted to expand the state’s workplace enforcement capacity and root out workplace-wide violations by allowing workers to seek civil penalties for violations and empowering them to seek penalties for all violations across a workplace in a single lawsuit. The lion’s share of the penalties (75 percent) goes to the state, with the remainder distributed among affected workers.
PAGA gives California workers—and the attorneys who represent them—an important tool to root out workplace-wide violations and deter employer lawbreaking. At the same time, it generates revenue for the state to fund future enforcement work aimed at creating a culture of compliance in industries with historically high rates of violations. One report found that PAGA improved employer compliance, generated over $88 million in revenue in 2019 alone, and funded a significant number of state Labor Department positions and enforcement initiatives.
Unfortunately, corporations had already been working to limit worker lawsuits—the other critical component of workplace law enforcement—through forced arbitration provisions and class action waivers. A series of Supreme Court decisions transformed the 1925 Arbitration Act into a shield that allowed corporations to unilaterally impose arbitration provisions on their employees and shunt workers’ cases into private, secret arbitration—despite ample evidence that Congress did not intend the law to apply to employment contracts. Most egregiously, in 2018 the court’s conservative majority held in Epic Systems v. Lewis that class and collective action waivers included in arbitration provisions were enforceable—meaning that where employers imposed such provisions, they could force workers to proceed one by one.
As a direct result of the Supreme Court’s misreading of the Federal Arbitration Act, forced arbitration provisions and class action waivers are now everywhere, imposed when workers start a job, or at any time after they’ve been hired, but usually buried in fine print. In forced arbitration, there’s no judge or jury. Instead, an arbitrator—typically a corporate lawyer or a former judge—is paid by the hour to adjudicate a claim. Workers lack the protections of being in court, including the right to fully discover information in the employer’s possession and the right to appeal. More than 60 million workers are now subject to forced arbitration provisions, including over 59 percent of Black workers and nearly 58 percent of women workers, and the number is expected to dramatically increase. And because most workers subject to forced arbitration abandon their claims rather than proceed alone in a stacked forum, forced arbitration is helping employers pocket billions in stolen wages.
That brings us to Viking River Cruises. California’s Supreme Court had adopted a rule, in the Iskanian case, recognizing that a worker who brings a PAGA action to root out workplace-wide violations is doing so on behalf of the state. And because the state was not a party to any arbitration provision, the worker’s PAGA claims—for both violations that affected them personally and for workplace-wide violations that affected other workers—could not be sent to arbitration. This allowed PAGA suits to continue, and because PAGA penalties can become quite substantial—for example, $100 per violation per affected worker, per pay period—employers can face hefty costs for violating the law. In that way, PAGA has proved a major deterrent for employer lawbreaking.
That’s why Viking River Cruises (and a host of massive corporations, including Uber) attacked the California rule. They did so by arguing that PAGA actions were nothing but a type of class action. Viking River Cruises insisted that because of the class action waiver it had imposed on the worker in the case, Angie Moriana, it could force her to waive any ability to bring a PAGA claim for violations that affected other workers, both in court and in arbitration, per the court’s 2018 Epic Systems decision. Because any one worker’s PAGA claim will be low, and the worker will only recover 25 percent of it themselves, such a rule would eliminate the incentive for a worker subject to a forced arbitration provision to bring a PAGA action in the first place.
The court’s decision, an 8–1 result, did not go as far as the corporations wanted—in part, perhaps, because it was tempered by the liberal justices. But the decision still deals a serious blow to PAGA as currently enacted and interpreted. Since PAGA claims cannot be split up, the court said California had coerced employers into giving up their right to arbitrate their PAGA claims on an individual, one-by-one basis in arbitrations, and that the FAA therefore preempted California’s rule in Iskanian. As a result, Viking River Cruises can force Moriana, and workers like her, to take their individual PAGA claim into arbitration.
It’s breathtaking to see the court evince such deep concern about the allegedly coercive effects of PAGA for employers while ignoring the coercion inherent when employers impose forced arbitration onto workers as a condition of employment.
The court’s decision is, for now, not all bad news for employees. The majority indicated that while Viking River Cruises could force Moriana to arbitrate her individual claim, it could not completely extinguish the claims she had filed on behalf of the state for violations affecting other workers. However, because the majority determined that PAGA does not allow a worker to continue a suit only for claims affecting other workers, those other claims must be dismissed. But the majority left some room for California to make changes to PAGA. As Justice Sonia Sotomayor elaborated in her concurring opinion, California courts or the state legislature can clarify that workers may still litigate their non-individual claims—that is, their claims for violations affecting other workers—even if their individual PAGA claims are sent to arbitration.
Some are interpreting these limitations on the court’s holding as a sign that PAGA can survive as an effective tool for enforcement of workplace protections. Advocates should absolutely seize on those limitations and fight to restore California’s capacity to hold lawbreaking corporations accountable for workplace-wide violations. And they should do the same in states like New York, which has also been considering a bill inspired by PAGA.
But we should be concerned with a newly constituted Supreme Court that has shown itself to have no regard for precedent and to be utterly willing to use its power to achieve its desired results. Any limitations suggested by the majority in Viking River Cruises do not signal such limitations will be respected in the future, no matter what the majority or Justice Sotomayor says. (Notably, Justices Amy Coney Barrett, John Roberts, and Brett Kavanaugh refused to join these potentially limiting portions of the opinion.)
All told, Viking River Cruises underscores the need for legislative reform to the Federal Arbitration Act. Congress made a significant step forward this year by restoring workers’ rights to go before judges and juries, and to do so collectively, in sexual harassment and assault cases. Now it must finish what it started by passing the Forced Arbitration Injustice Repeal (FAIR) Act.
In the meantime, agencies can act to protect workers. For example, the Department of Labor can roll back Trump-era guidance that the agency deprioritize workplaces with forced arbitration and instead publicly signal that it is directing enforcement resources toward such workplaces, particularly in sectors where compliance is low. And the Equal Employment Opportunity Commission should reinstate that agency’s enforcement guidance on forced arbitration, which the agency rescinded in the Trump era. These actions would send powerful messages to employers that their use of forced arbitration will only invite more scrutiny.