In Iskanian v. CLS Transportation Los Angeles (6/23/14), the California Supreme Court issued one of its most important decisions for employers in years. Iskanian holds that California courts are required to enforce class action waivers in employee arbitration agreements as long as the agreements are otherwise enforceable. Although the California Supreme Court had ruled in 2007 that such class action waivers were invalid, the Court held that it was compelled to overrule its prior position based upon recent rulings by the United States Supreme Court.
Even when California courts treated class action waivers as invalid, many employers elected to require employees to sign arbitration agreements to have employee claims decided by a professional arbitrator, and avoid the prospect of facing famously unpredictable California juries. Now that arbitration agreements can also spare employers from facing California employee class action lawsuits, California employers would be wise to consider requiring employees to sign arbitration agreements with class action waivers.
There are some caveats to the Iskanian ruling. First, the Court ruled that an employee’s right to bring a claim under the California Private Attorneys General Act (“PAGA”) (providing for the recovery of civil penalties and attorneys’ fees for certain Labor Code violations) is unwaivable in an arbitration agreement. However, because most of the penalties awarded in a PAGA claim goes to the state (thereby reducing the incentive for an employee to bring such a claim), the PAGA is often viewed as less of a threat to employers than an employee class action.
Also, while Iskanian ruled that the National Labor Relations Act (“NLRA”) did not ban class action waivers, the federal National Labor Relations Board has taken the position that class action waivers in arbitration agreements amount to an unfair labor practice under the NLRA. Employee remedies for an unfair labor practice claim are generally limited to actions to place the employee in the position s/he occupied prior to the alleged violation (e.g., requiring rescission or revision of an allegedly unlawful arbitration agreement) and workplace postings of the remedy, whereas employee class actions tend to present much greater potential liability by a large class of employees, and are much more costly to defend. Therefore, although the NLRB could still force an employer into maintaining an arbitration agreement without a class action waiver, we believe that many employers will reasonably conclude that the unfair labor practice claim risk is worth taking to gain protection from employee class actions in California courts.
For a more detailed review of the Iskanian decision, you may request access below to the recording of our July 23, 2014 webinar: Arbitration Update – What Every California Employer Should Know. In addition to review of Iskanian, this webinar discusses:
- The pros and cons of employers implementing arbitration agreements;
- Best practices for implementing such agreements across the workforce; and
- Common drafting mistakes employers make that have resulted in courts invalidating arbitration agreements.
This is a program that was originally presented by Brian Nagatani and Mary Wang on July 23, 2014. Please note that the webinar provides only general information about the law, and does not constitute legal advice. Companies or individuals seeking legal advice should retain counsel.
Please note that HR and attorney continuing education credits are not available for watching this recorded program.
You may request an e-mail with links to the program materials and website where you may watch the program here: Access Request Form