Today, the California Supreme Court issued its latest and long-awaited arbitration decision, Iskanian v. CLS Transportation Los Angeles, LLC. On the one hand, Iskanian concluded that class action arbitration waivers are enforceable under the Federal Arbitration Act, marking a major victory for California employers. On the other hand, Iskanian created a limited carve-out for "representative actions" brought under California's Private Attorneys General Act of 2004 ("PAGA") (Labor Code, § 2698 et seq.). PAGA actions, which are governed by a one-year statute of limitations, allow aggrieved employees to seek specified "civil penalties" for Labor Code violations. Iskanian held that employers could not, through pre-dispute arbitration agreements, require employees to waive their ability to bring PAGA claims in court.
What does this mean for California employers? California employers now have added protection against wage-and-hour class actions. Employers who have properly-drafted arbitration agreements can turn what would otherwise be a class action lawsuit into an individual arbitration with the class plaintiff only. Although, under Iskanian, an employer cannot require an employee to arbitrate a representative PAGA action, such actions are limited by their one-year statute of limitations.
In light of Iskanian, employers who already have arbitration agreements in place should review them now to make sure they contain proper class arbitration waivers. For employers who have yet to adopt arbitration agreements at all, today's Iskanian decision provides strong incentive to do so.
New or updated arbitration agreements with proper class arbitration waivers can be rolled out to existing employees. Indeed, the class plaintiff in Iskanian was employed for many months before he entered into his arbitration agreement.