This week brought some good news for employers seeking to enforce class and representative action waivers in arbitration agreements in California. In Iskanian v. CLS Transportation [pdf], the Court of Appeal applied the recent holding of the United States Supreme Court in AT&T Mobility v. Concepcion and upheld the dismissal of a pending wage-and-hour class action in state court. Congratulations to Fox Rothschild and the entire defense team for this winning decision.
There are a few key aspects of this case that will impact this area of the law going forward.
First, while California courts had previously followed the standards articulated by the California Supreme Court in Gentry v. Superior Court which essentially held that class action waivers in arbitration agreements were not viable in the employment context, this case held otherwise. In fact, the Court of Appeal specifically held that “the Concepcion decision conclusively invalidates the Gentry test.”
Second, the Court declined to follow a recent NLRB decision, D.R. Horton, holding that a class action waiver interfered with employees’ section 7 rights under the National Labor Relations Act to engage in collective activity, and therefore was unenforceable. Since the Federal Arbitration Act is not a statute the NLRB is charged with interpreting, the Court of Appeal held that it was under no obligation to defer to the NLRB’s analysis.
Third, as to the PAGA claim, the Court “respectfully disagreed” with another recent Court of Appeal case, Brown v. Ralphs Grocery Co. [pdf], which many of us believe should not be prevailing law. Instead, the Court held that Concepcion does apply to representative actions under PAGA, and that a waiver of PAGA representative actions is enforceable under California law.
What does this case mean to you? California attorneys now have published and binding authority to cite when supporting the enforceability of a class action waiver in an arbitration agreement. But there is also now conflicting authority on this issue in California, and plaintiff’s counsel in this case has indicated an intent to appeal to the California Supreme Court. So stay tuned for further developments. Even so, no matter what happens, if you have an arbitration agreement without a class action waiver, then it may be time to add one.