Class Action Waivers Enforceable in Employment Arbitration Agreements

On Monday, June 23, 2014 the California Supreme Court held that class action waivers are enforceable in employment arbitration agreements.  This means that an employee and employer can agree through a binding arbitration agreement that the employee may not assert class action claims against the employer.  In the same case the Court found that a representative action through California’s Private Attorney General Act (“PAGA”) cannot be waived.  The Court found a distinction between a class action which primarily benefits employees and a PAGA action which primarily benefits the state.  Under PAGA, an employee may notify the state of its intention to bring a representative action against the employer seeking civil penalties for Labor Code violations.  If the state consents and the employee prevails, 75% of the penalties go to the state and 25% go to the individual employee who brings the action.

Questions left open by the Court include whether the arbitration agreement can require the PAGA action to be arbitrated and if the PAGA action is not arbitrated whether the arbitration would be stayed pending the outcome of the PAGA action in civil court.

The Court found that the United States Supreme Court’s seminal 2011 case of AT&T Mobility v. Concepcion made clear that the Federal Arbitration Act preempts a state’s refusal to enforce a class action waiver on grounds of public policy or unconscionability.  The case is called Iskansian v. CLS Transportation Los Angeles LLC, and the full opinion can be read here: .

With questions about this decision or what it means for you or your business, email Jennifer Phillips at [email protected].