California Supreme Court Upholds Class Action Waiver In Arbitration Agreement

Finally! The California Supreme Court recently fell in line with the United States Supreme Court on the enforceability of class action waivers in arbitration agreements by upholding their enforceability. Previously, the California Supreme Court had held in Gentry v. Superior Court that class action waivers in employment agreements were invalid in certain circumstances. Subsequently, the United States Supreme Court decided the AT&T Mobility v. Concepcion case, which in effect upheld class action waivers, with the Court reasoning that a state procedure that is incompatible with arbitration is preempted by the Federal Arbitration Act (FAA). But now, with its recent ruling in Iskanian v. CLS Transportation Los Angeles, LLC, the California Supreme Court has agreed that class action waivers in arbitration agreements are indeed enforceable.

There’s still a fly in the ointment, however, because the Iskanian Court ruled that a waiver of a Private Attorneys General Act (PAGA) claim in an arbitration agreement is unenforceable in California as a matter of public policy. Under PAGA, employees can seek Labor Code penalties from employers on behalf of other employees as representatives of the of the State of California, with the majority of penalties recovered going to the State of California and the employees retaining 25% for themselves. The Court reasoned that this decision did not violate the FAA, since the FAA is intended to ensure an efficient forum for the resolution of private disputes and a PAGA claim is more like a public dispute, albeit with a private citizen standing in the shoes of the State of California.

What does all this mean to California employers? It means that employers can include class action waivers in arbitration agreements with employees, and employers should review any arbitration agreements with this in mind. Individuals signing such waivers face a substantial obstacle if they bring a class action suit against an employer for alleged violations of such issues as overtime, meal and other breaks, and wage and hour claims, etc. However, considering that the California Supreme Court has deemed any waiver of a PAGA claim in favor of arbitration to be unenforceable, the revised waiver will have to be limited in scope.

This blog is presented under protest by the law firm of Ervin Cohen & Jessup LLP.  It is essentially the random thoughts and opinions of someone who lives in the trenches of the war that often is employment law–he/she may well be a little shell-shocked.  So if you are thinking “woohoo, I just landed some free legal advice that will fix all my problems!”, think again.  This is commentary, people, a sketchy overview of some current legal issue with a dose of humor, but commentary nonetheless; as if Dennis Miller were a lawyer…and still mildly amusing.  No legal advice here; you would have to pay real US currency for that (unless you are my mom, and even then there are limits).  But feel free to contact us with your questions and comments—who knows, we might even answer you.  And if you want to spread this stuff around, feel free to do so, but please keep it in its present form (‘cause you can’t mess with this kind of poetry).  Big news: Copyright 2014.  All rights reserved; yep, all of them.

If you have any questions about this article, contact the writer directly, assuming he or she was brave enough to attach their name to it.  If you have any questions regarding this blog or your life in general, contact Kelly O. Scott, Esq., commander in chief of this blog and Head Honcho (official legal title) of ECJ’s Employment Law Department, at (310) 281-6348.


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