For better or worse, California seems to be on the cutting edge of trends for the rest of the nation. Now, just in time for Labor Day, California’s highest court has issued a ruling sure to send some rumbles through general counsels’ offices.

Earlier this week, the California Supreme Court “handed workers a major victory,” according to the Los Angeles Times, “allowing them to bring class-action lawsuits alleging labor code violations even if they had signed agreements with their employers requiring them to arbitrate such disputes.”

Workers everywhere sign these kinds of agreements when they start a new job. The documents usually ask you to agree to arbitration in the event of a dispute, waiving your right to file a class-action lawsuit, limiting damages and the recovery of attorney’s fees. The California case involved a claim by a sales manager at Circuit City —no surprise there—who claimed that the company had wrongly classified his job as exempt from overtime. “Circuit City referred the case to arbitration,” according to the San Francisco Chronicle, “citing an agreement the employee had accepted after he was hired, and invoked a provision of the arbitration agreement that required each employee’s claim to be considered individually.”

But the California Supreme Court, in a 4-3 vote, found that “a ban on class-action claims for overtime—either in court or before an arbitrator—is illegal in most cases because it undermines ordinary employees’ ability to enforce their rights under state law,” according to the Chronicle. “That law entitles employees to time-and-a-half pay for working more than eight hours in a day or 40 hours in a week.”

Depending on where you stand, this is either a huge victory for the working man or a terrible injustice that will bring a fiery hail of lawsuits down upon businesses everywhere. It’s probably neither, but as attorney Colleen Regan told the Los Angeles Times, “although the decision binds only California employers, it will probably undermine arbitration waivers nationally. California law tends to set the standard in labor cases, Regan said. National companies really desire consistency in their human resources policy, so they set the bar at California.”

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