California Supreme Court Upholds Class Action Waivers in Arbitration Agreements, but Invalidates Waivers of Representative Actions under the California Private Attorneys General Act


On June 23, the California Supreme Court provided mixed blessings to California employers. In Iskanian v. CLS Transportation, No. S204032 (June 23, 2014), the Court upheld class action waivers in arbitration agreements, concluding that its so-called Gentry Rule, under which such waivers had generally been found unenforceable, was contrary to recent U.S. Supreme Court precedent under the Federal Arbitration Act (FAA). The Court also rejected arguments that class action waivers are unlawful under the National Labor Relations Act. These holdings are victories for the enforceability of class arbitration waivers in the employment context and beyond.

Offsetting these victories, however, the Court invalidated waivers of the right to bring representative actions under the California Private Attorneys General Act (PAGA) to enforce the California Labor Code, holding that such waivers are contrary to California public policy and that California’s policy is not preempted by the Federal Arbitration Act.

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