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The California Court of Appeal has confirmed that class action
waivers are enforceable in California employment arbitration
agreements.
The plaintiff in Iskanian v. CLS Transportion Los Angeles,
LLC, brought a putative class action and a representative
action under California's Private Attorney General Act (PAGA)
for various wage and hour violations. During his employment,
Iskanian agreed that he would not assert class action or
representative action claims against his employer and instead,
agreed to submit any legal claims he had to arbitration.
The California Court of Appeal for the Second District held that
the employee was bound by his agreement. Relying on the United
States Supreme Court's decision in AT&T Mobility LLC v.
Concepcion, the Court held that the Federal Arbitration Act
(FAA) preempts any state law prohibiting class action waivers in
arbitration agreements. The Court also found that
Concepcion overruled Gentry v. Superior Court
– a California appellate decision which held that class
action waivers in arbitration agreements are unenforceable if class
arbitration would be more efficient than individual litigation.
Rejecting this notion, the Court stated, "a rule like
Gentry – requiring Courts to determine whether
to impose class arbitration on parties who contractually rejected
it – cannot be considered consistent with the objective
of enforcing arbitration agreements according to their
terms."
The Court also considered whether class action waivers violate
section 7 of the National Labor Relations Act which protects the
rights of employees to engage in concerted activity. The Court
found that Concepcion "made no exception for
employment-related disputes" and rejected the argument.
Finally, the Court addressed whether Iskanian could waive his
right to bring a representative action under PAGA. Under PAGA, an
aggrieved employee may bring an action to recover civil penalties
for Labor Code violations on his or her own behalf and on behalf of
current or former employees.
The Court considered and rejected other California appellate
Court decisions which held that because PAGA promotes an important
public policy concerning wage law enforcement, PAGA claims are
unwaivable. The Court noted that when state law prohibits outright
arbitration of a particular type of claim, the conflicting rule is
displaced by the FAA. Since federal preemption requires that state
law bend to conflicting federal law, a state cannot avoid
preemption simply because it intends to promote public policy.
Iskanian represents a victory for employers wishing to
implement employment arbitration agreements. As long as the
arbitration agreement is not found to be unconscionable under
established contract principles, this ruling should make it easier
for employers to compel arbitration when employees have filed class
action lawsuits contrary to their written agreements.
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