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The California Supreme Court has upheld the validity of class action waivers in employment arbitration agreements, reversing its prior rule that California courts could refuse to enforce such waivers on grounds of public policy or unconscionability. At issue was an employee’s right to bring a class action against his employer after he had entered into an arbitration agreement and waived the right to class proceedings. The court had previously held that class action waivers in employment arbitration agreements were, in large part, invalid. In light of the U.S. Supreme Court’s decision in Concepcion, which reversed a California decision restricting consumer class action waivers in arbitration agreements, the California Supreme Court recognized that the Federal Arbitration Act preempts its rule against employment class waivers. The court also rejected arguments that class action waivers were unlawful under the National Labor Relations Act and that the employer in the case had waived its right to arbitrate by withdrawing its motion to compel and otherwise failing to diligently pursue arbitration.

The employee had also sought to bring a representative action under the state’s Labor Code Private Attorneys General Act of 2004 (PAGA). That action was not subject to FAA preemption. The court upheld California’s public policy prohibiting waivers of representative actions brought under PAGA, distinguishing them from private employment disputes, characterizing PAGA claims as “public enforcement actions.” The court further held that PAGA did not violate the principle of separation of powers under the California Constitution. Having concluded that the employer could not compel the waiver of the employee’s representative PAGA claim, but that the employee had waived his right to class proceedings and must therefore proceed to arbitration on his individual damage claims, the court remanded the case for further proceedings to determine forum and bifurcation issues. Iskanian v. CLS Transportation of Los Angeles, LLC, Case No. S204032 (Cal. June 23, 2014).

This post written by Renee Schimkat.

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Basulto v. Hialeah Automotive, Case No. SC09-2358 (Fla. March 20, 2014) (reversing intermediate appellate court’s ruling compelling arbitration on monetary relief claims; intermediate court failed to limit its review to whether a valid arbitration agreement existed; no valid agreement due to substantive and procedural unconscionability);

Crawford Professional Drugs, Inc. v. CVS Caremark Corp., Case No. 12-60922 (5th Cir. April 4, 2014) (affirming order compelling arbitration, notwithstanding argument by non-signatories that they were not subject to the arbitration clause; state law may allow an arbitration contract to be enforced by or against nonparties to the contract through state-contract-law theories, including equitable estoppel);

Sanchez v. Carmax Auto Superstores California, LLC, Case No. B244772 (Cal. Ct. App. Feb. 6, 2014) (reversing order denying motion to compel arbitration; arbitration agreement was not illusory, nor unenforceable for procedural unconscionability merely because it was an adhesion contract; arbitration agreement was not substantively unconscionable in that it had bi-lateral application, it did not overly limit discovery, and arbitration rules and procedures were not unfair);

Caplin Enterprises, Inc. v. Arrington, Case No. 2011-CT-01332-SCT (Miss. May 8, 2014) (reversing intermediate appellate court’s ruling that certain arbitration agreements were enforceable; all agreements were contracts of adhesion and so one-sided in their terms as to meet the standard for substantive unconscionability);

Tiri v. Lucky Chances, Inc., Case No. A136675 (Cal. Ct. App. May 15, 2014) (reversing denial of petition to compel arbitration based on trial court’s finding of unconscionability; trial court lacked authority to rule on enforceability of the arbitration agreement where the parties delegated such authority to the arbitrator).

This post written by Michael Wolgin.

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