Class-Action Waivers in Calif. and Beyond After ‘Iskanian’
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In June the California Supreme Court issued its much-anticipated decision in Iskanian v. CLS Transportation of Los Angeles. In its already controversial opinion, the court held that its prior decision in Gentry v. Superior Court, which had held that a class-action waiver would not be enforced if it undermined the vindication of employees’ statutory rights, could not survive the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion. The court further held that the Federal Arbitration Act (FAA) preempts a state’s refusal to enforce a class-action waiver on grounds of state public policy or unconscionability, and likewise rejected the argument that a class-action waiver is unlawful under the National Labor Relations Act (NLRA). However, the court held that the FAA does not preempt state law that prohibits waiver of an employee’s right to bring a “representative” action under California’s Private Attorneys General Act (PAGA).
Iskanian has employers, in both California and around the country, wondering what the decision means to their businesses. Although the full impact of the decision is unknown because, among other things, the case may ultimately be decided by the U.S. Supreme Court, there are many lessons employers can learn from it.
For starters, employers that currently use arbitration agreements containing class-action waivers should feel more secure that the agreements will be enforced. For those employers considering rolling out an arbitration agreement containing a class-action waiver, there has never been a better time. As Iskanian demonstrates, even states like California that have traditionally been hostile to arbitration agreements are finally accepting the reality that a state’s ability to refuse to enforce an arbitration agreement governed by the FAA is very limited.
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