This week the Supreme Court of California held that the FAA preempts California’s 2007 Gentry ruling, one that protected employees from nearly all class action waivers in arbitration agreements. Iskanian v. CLS Transp. Los Angeles, LLC, __ P.3d__, 2014 WL 2808963 (Cal. June 23, 2014). However, asserting its Californian-ness, the court found an clever way of ruling that arbitration agreements in employment contracts may still not waive a particular type of joint action: representative actions brought under California’s Private Attorneys General Act.

The decision reads like a Greatest Hits of Arbitration Law – 2014 edition. It touches on almost every hot issue in arbitration law in recent years: Concepcion and FAA preemption; vindication of statutory rights; waiver of the right to arbitrate; and the fight over whether federal labor laws can trump the Federal Arbitration Act (the D.R. Horton issue). (Are the 14 different groups of amici in the case to blame for the plethora of issues?! Or is that what drew them there??) The holdings on those issues track what courts around the country have done:

• California found that “[u]nder the logic of Concepcion, the FAA preempts Gentry’s rule against employment class waivers. (Gentry made it possible to invalidate a class action waiver if class arbitration will be “a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration.”)
• California agreed with other federal courts that Sections 7 and 8 of the National Labor Relations Act do not override the FAA’s mandate to enforce arbitration agreements, even those agreements with class action waivers.
• California recognized that a party who gives up on compelling arbitration in light of a precedential decision that makes enforcing the arbitration clause futile (in this case, Gentry), does not thereby waive its right to arbitrate.

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