The nationwide surge in decisions approving mandatory arbitration agreements for employees continued late last month, when the employee-friendly California Supreme Court found that a 2007 decision issued from its bench saying that class waivers were unenforceable in certain circumstances is invalid in light of U.S. Supreme Court precedent.
In Iskanian v. CLS Transportation Los Angeles LLC, the California Supreme Court found that its prior precedent was preempted by the Federal Arbitration Act and its interpretation by the U.S. Supreme Court in AT&T Mobility v. Concepcion. California state courts, one of the last remaining murky territories for enforcement of mandatory employee class waiver arbitration agreements, are now bound to accept them.
The decision still has an important exception – employers may not preclude class actions brought under California’s Private Attorney General Act (“PAGA”), because of what the California Supreme Court found to be an inherent conflict with public policy. California’s PAGA allows employees to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency. While employees are required to give notice to an employer and an opportunity to cure before bringing suit under PAGA, this is often an undesirable option for employers in claims alleging significant penalties across a large workforce.
As we have reported previously, this trend follows the overwhelming majority of Circuit Courts of Appeal to enforce such agreements. This stands as yet another blow to the National Labor Relation Board’s controversial D.R. Horton ruling, which stands as a major outlier in this overwhelming trend.
While employers should continue to take solace in these decisions that continue to narrow those jurisdictions where enforcement is shaky (to the extent they still exist), they should also realize that class action waivers and arbitration agreements are not a one-size-fits-all policy. Employers must consider their size, the potential claims at issue, and other factors to determine if such agreements are right for them.