What Does the Supreme Court’s Decision on the Federal Arbitration Act Mean for Employers?

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What Does the Supreme Court’s Decision on the Federal Arbitration Act Mean for Employers?

California’s AB51 was signed into law in 2019. This law prohibits forced arbitration as a condition of getting a job. Employers cannot retaliate against employees who will not sign an arbitration agreement. But, there has been a lot of back and forth with this law after a federal judge granted an injunction claiming it interferes with FAA. Much of that decision was then struck down by the Ninth Circuit in September 2021. I

It’s recently become a hot topic again due to a recent decision in the Viking River Cruise appeal and the Supreme Court’s decision. Here’s what you need to know and what it means for employers and their employees.


The Federal Arbitration Act (FAA) is a congressional act that allows for arbitration to be used to settle private (individual) disputes. What does this mean? Arbitration is a method of dispute settlement that uses an arbitrator to hear the dispute and make a decision. Once arbitration is decided, it is confirmed by a court. With FAA, the award has to be confirmed within 12 months and objections and challenges must be made within three months.

The California Private Attorneys General Act (PAGA) became effective in 2004. It’s an act that allows aggrieved employees to file a lawsuit regarding labor code violations to gain civil penalties for themselves, other employees, and the State of California. These civil penalties for companies with one or more employees are:

  • $100 per aggrieved employee per pay period for the initial violation
  • $200 per aggrieved employee per pay period for subsequent violations
  • Or, $500 if the employer has no employees at the time of the violation

This June, the Supreme Court ruled that FAA preempts a waiver related to PAGA. If you’ve heard anything about this, or even if you haven’t, it’s important to understand what the Supreme Court’s decision means. It could affect individuals who want to file complaints regarding labor code violations.

Moriana vs. Viking River Cruises

When Angie Moriana took a job with Viking River Cruises, her contract had an arbitration waiver and a waiver stating employees “cannot bring any dispute as a class, collective, or representative action under PAGA.” When she left her sales representative job with Viking River Cruises, she waited beyond 72 hours for her final paycheck, which is a violation of labor laws.

She ended up filing an individual claim against the company for that and then for other violations (representative action) of California’s labor code. Viking River immediately moved to dismiss the lawsuit stating that the contract she signed requires complaints to go to arbitration. California’s appeals court ruled in favor of Moriana by saying that arbitration agreements are not allowed under PAGA.

Viking River Cruises appealed that decision. The company wanted arbitration for the individual complaint and to toss out the representative complaint. The appeal went to the U.S. Supreme Court. The U.S. Supreme Court heard the appeal case and ruled for Viking River Cruises saying that FAA overrules PAGA rules and they reversed the California court’s ruling. Essentially requiring Moriana’s individual complaint to go to arbitration and the remaining complaints were dismissed per the contracted terms.

How Does Arbitration Work?

Arbitration is a process where complaints are heard outside of a court setting and the arbitrator hears both sides, looks at the evidence, and makes a decision. It’s informal and usually less expensive than a court hearing. It can also be quicker to arrange and complete.

Not every complaint qualifies for arbitration. Sexual harassment complaints are an example. Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act became law on March 3, 2022. Employees are welcome to enter into arbitration if they want to voluntarily, but an employer cannot mandate arbitration.

You’ll need to be able to prove your case. This can be tricky if you don’t have printed evidence. Your employer will have access to employment records to which you’re not privy, and that can negatively impact your case. Make sure you are able to get the evidence needed. The best way to do this is to get information before you file the complaint to start the arbitration process. Once you file a complaint, you might find yourself shut out of company networks and databases.

Once an arbitrator makes a decision, it is final if it’s binding arbitration. Binding means it cannot be appealed or overturned in a court. There is also nonbinding arbitration, which means it can be rejected by either party and move to a court trial.

Who chooses the arbitrator? It depends. Your employer may have to use an arbitration association like the American Arbitration Association. Sometimes, a company will choose an attorney to act as an arbitrator. You should be able to say who the arbitrator is, but this depends on the contract you’ve signed. Make sure you understand if you’re allowed to reject an arbitrator or not.

If you do have a say, go over the disclosed information about the prospective arbitrator’s personal interests, stocks, etc. If the arbitrator is found to hold stock in your employer’s business, they may be biased. Look for potential bias and ask to reject that prospect. You may be limited to the number of rejections you’re able to give, so use them carefully.

Check to see if you’re still allowed to have an attorney represent you. Just because the complaint isn’t being heard in a courtroom, it doesn’t mean you have to forgo the expertise of an attorney. Your employer is likely going to have legal representation to help them.

Arbitration is private and only a few people are allowed in the room. Don’t be afraid to speak up if you feel something is wrong or unfair. This is why it’s best to have legal representation if you can, but if you can’t, be vocal and advocate for yourself.

Finally, don’t be afraid to reach out to the U.S. Equal Employment Opportunity Commission. While you may be required to enter into arbitration, the EEOC may want to take a closer look at labor code violations.

Don’t Sign Employment Contracts Without First Consulting an Attorney

What this does is places the power in the employer’s hands if they have representative action waivers in place. As an employee, don’t sign a contract if you’re not 100% certain about what you’re signing.

Before you take a job, consider having an employment law specialist look over the contract to ensure your rights are protected. If a contract protects a company more than the employees, it’s not an employment contract you should sign. The other benefit to having an employment law attorney look over the contract is that confusing terms are clarified. By doing this, you protect yourself from unpleasant work conditions.

What if it’s too late? You’ve already signed an employment contract when you took your current job. Are you worried that your rights are being violated? If you’re being mistreated by your employer, schedule a free consultation with Shegerian Conniff. We’ll fight to ensure you’re treated fairly, and we’ll let you know if your contract allows you to file a complaint or if you’re going to be required to enter into arbitration. Call or message us today to schedule a consultation.

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