A California court of appeals held in Franco v. Arakelian Enterprises, Inc. that the United States Supreme Court decisions in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. and AT&T Mobility LLC v. Concepcion did not overrule the California Supreme Court's Gentry v. Superior Court decision regarding the viability of class action waivers in arbitration agreements.
Franco signed an arbitration agreement during his employment with Arakelian that contained a class action waiver. He filed a class action complaint against Arakelian in court for alleged wage and hour violations, and Arakelian sought to compel arbitration of the claims. In denying Arakelian's petition to compel arbitration, the court applied Gentry (September 2007 FEB), which held that class action waivers in arbitration agreements may be unenforceable in certain circumstances – for example, where class arbitration is a more effective practical means of vindicating the rights of the affected employees and the prohibition of the class action will lead to less comprehensive enforcement of overtime laws for the affected employees – and provided factors to use in analyzing whether such waivers should be enforced. On appeal, Arakelian argued that the subsequent United States Supreme Court decisions in Stolt-Nielsen and Concepcion overruled Gentry.
The court rejected Arakelian's theory, finding that both Stolt-Nielsen, which held that a plaintiff can only pursue claims on a class basis in arbitration if the arbitration agreement expressly or impliedly authorizes class actions, and Concepcion, which overturned a California court's refusal to enforce such waivers in the consumer arbitration arena, can be read in harmony with Gentry.
Thus, while class action waivers between employer and employee may be permissible under California law, they must nevertheless satisfy the Gentry analysis.