Franco v. Arakelian Enterprises, Inc., No. B232583 (Cal. App. 2d, November 26, 2012): In a recent decision by the Second Appellate District of California, the court held that the multifactor test set forth by the California Supreme Court in Gentry v. Superior Court to determine the enforceability of class action waivers in arbitration agreements covering overtime claims was not overruled by the U.S. Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion.

A trash truck driver brought a class action claim based on the employer’s alleged failure to provide overtime pay and meal and rest periods. The employer raised class arbitration and Private Attorney General Act (PAGA) waivers that were in its employment arbitration policy, but the court held that the waivers were unenforceable under California law. Under the Gentry test, courts must consider the following four factors when determining whether a class action waiver clause should be enforced in pre-dispute employment arbitration agreements: “the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members' right to overtime pay through individual arbitration.” One of the key factors applied by the Franco court under the Gentry test was the unlikelihood that an attorney would agree to take an individual case given that the potential recovery for an individual wage and hour claim would be so little.

According to Rafael Nendel-Flores, a shareholder in Ogletree Deakins’ Orange County office, “California's appellate courts continue to be divided as to whether Gentry's four-part test governing the enforceability of class action waivers in wage and hour litigation remains good law in light of the U.S. Supreme Court's decision in Concepcion. While in Franco, one panel of the Second Appellate District held that Gentry was still good law, a different panel of the same Second Appellate District previously held in Iskanian v. CLS Transportation the exact opposite—that Gentry is no longer good law. The California Supreme Court granted review of Iskanian in September of 2012, and it will likely grant review of the Franco decision as well. The bottom line for employers is that there will be no definitive answer to the Gentry question until the California Supreme Court weighs in."