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California Supreme Court Upholds Class Action Waiver in Employment Arbitration Agreements But Held Waiver of Representative Claims Under PAGA Was Not Permitted.

Posted on: June 24th, 2014

 

By: Sandra McIntyre

Recently, in Iskanian v. CLS Transportation, the California Supreme Court upheld the enforceability of class action waivers in employment arbitration agreements, but held that employees cannot waive representative claims under the California Private Attorneys General Act (“PAGA”).

In Iskanian, an employee signed an agreement to arbitrate disputes related to his employment.  The agreement contained a class action waiver and a representative action waiver.  He then filed a class action lawsuit, alleging Labor Code violations, including failure to provide meal and rest breaks; failure to pay overtime compensation; and, failure to pay business expense reimbursements.  The California Supreme Court held that the class action waiver was enforceable, but the PAGA waiver was not.  The California Supreme Court reasoned that the U.S. Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) allows employees to waive their right to class arbitration, but the same reasoning does not apply to PAGA claims, wherein an employee brings a representative action to prosecute Labor Code violations on behalf of the State of California for Labor Code violations suffered by the employee and other similarly situated employees.

In light of the Iskanian decision, employers with arbitration agreements should consider amending their agreements to include a class action waiver and employers without arbitration agreements now have another good reason to implement them.

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