Following the U.S. Supreme Court's recent decision in AT&T Mobility v. Concepcion, the biggest question facing employers has been the extent to which the decision can be applied in the employment context. The Court in Concepcion essentially held that the Federal Arbitration Act ("FAA") requires arbitration agreements containing class action waivers to be enforced according to their terms, and that the FAA preempts state-law unconscionability doctrines that would otherwise invalidate such agreements. But Concepcion arose in the context of a consumer adhesion contract. How it applies in employment cases, and, in particular, wage-and-hour cases, is still in flux. Several recent decisions have begun to shed some light on this issue.

Key California Decisions

Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011): Brown is probably the most troublesome California decision interpreting Concepcion to date. In Brown, California's Second District Court of Appeal held a class action waiver in an arbitration agreement to be unenforceable as to the plaintiffs' representative claims under the California Labor Code's Private Attorneys General Act of 2004 ("PAGA"). The court reasoned that PAGA actions, which enable plaintiffs to seek statutory penalties for wage-and-hour violations on behalf of other employees, are designed to enforce public rights and, therefore, are not subject to the holding of Concepcion (which arose in the context of private actions seeking damages). This rationale is questionable at best, however, as it completely ignores the central premise and holding of Concepcion: that arbitration agreements must be enforced according to their terms. Brown is also notable for a footnote in which it suggests, but does not hold, that the California Supreme Court's infamous Gentry decision, which effectively invalidated class action waivers in employment agreements, could still be good law despite Concepcion

Valle, et al. v. Lowe's HIW, Inc., No. 11-1489 SC (N. D. Cal. Aug. 22, 2011): In Valle, the Northern District of California went in a very different direction than the Brown court regarding both the PAGA question and the viability of Gentry. The court rejected plaintiffs' argument that PAGA claims are not subject to arbitration, and, though the court did not decide the ultimate question of whether class action waivers can apply to PAGA claims, it suggested that they might. In addition, the Valle court held that Gentry is no longer good law in light of Concepcion, and therefore cannot be used as a basis for invalidating class action waivers in employment agreements. This aspect of Valle's holding supplements a growing body of district court authority holding Gentry to be invalid. See, e.g., Murphy v. DIRECTV, No. 07-6465, 2011 WL 3319574, at *4 (C.D. Cal. August 2, 2011) (holding Concepcion overruled Gentry); Morse v. ServiceMaster Global Holdings, Inc., No. 10-0628, 2011 WL 3203919, at *3, n.1 (N.D. Cal. July 27, 2011) (Concepcion rejected the reasoning and precedent behind Gentry). 

Key Non-California Decisions

Williams v. Securitas Security Services USA, Inc., C.A. No. 2:2010-7181, 2011 WL 2713741 (E.D.Pa. July 13, 2011): In Williams, defendant attempted to implement an arbitration agreement containing a class action waiver during a pending proposed Fair Labor Standards Act ("FLSA") collective action. Plaintiffs filed a motion for a protective order to prevent defendant from doing so, arguing that defendant's new arbitration agreement constituted an impermissible attempt to influence the litigation through improper communication with proposed class members. In granting plaintiffs' motion and ordering defendant to rescind the agreements as to all putative class members, the court rejected defendant's claim that Concepcion precluded the court from invalidating the new arbitration agreements. The court reasoned that whereas Concepcion concerned the propriety of invalidating class action waivers under state-law unconscionability doctrines, its decision to rescind defendant's arbitration agreement was a function of its right—under the Supreme Court's decision in Hoffman La Roche, Inc. v. Sperling, 493 U.S. 165, 171 (1989)—to enter appropriate orders with regard to the conduct of counsel and communications with potential plaintiffs in FLSA collective actions. Because defendant's arbitration agreement was, in the court's view, an improper attempt to influence the litigation through a confusing communication, it did not implicate Concepcion

Mansberger v. Ernst & Young LLP, Case No. 652093/10 (N.Y.S.C. July 1, 2011): In Mansberger, defendant moved to compel individual arbitration of plaintiff's pending putative wage-and-hour class action. Prior to the filing of his lawsuit, Plaintiff signed and executed a confidentiality agreement containing E&Y's "Common Ground Dispute Resolution" policy, which expressly provides that all disputes between plaintiff and E&Y be submitted to binding, individual arbitration. Plaintiff argued that the agreement was unconscionable because its enforcement would, among other things, prevent plaintiffs from utilizing class action procedural mechanisms and otherwise have a "chilling" effect on potential class action plaintiffs. Citing Concepcion, the court squarely rejected this argument, noting that requiring class-wide arbitration over the parties' express agreement to individual arbitration would frustrate the purpose of the FAA.

Lessons

The above decisions make clear that the law is still very much in flux post-Concepcion. In California, employers should expect to see a PAGA claim accompany all future wage-and-hour class actions, as Brown provides the plaintiffs' bar with a roadmap for attempting to avoid compelled bilateral arbitration under Concepcion. California employers also should expect to see a flurry of additional opinions—some good, some bad—regarding both the PAGA issue and the continuing viability of Gentry in light of Concepcion. Ultimately, these issues seem destined to be resolved by higher courts. 

Outside of California, Mansberger provides a good example of how courts in other jurisdictions are—like the court in Valle—willing to apply Concepcion in the wage-and-hour context. Williams provides a valuable lesson in the risks of implementing arbitration agreements as to employees who are putative class members in pending wage-and-hour class/collective actions. Indeed, notwithstanding Concepcion, the Hoffman-La Roche line of cases gives courts the power to control their proceedings, including the power to rescind arbitration agreements that are implemented during litigation in an attempt to influence litigation. In other words, be careful out there.