The future of California labor and employment class actions took several blows this week. First, the Supreme Court of California issued a decision in Iskanian v. CLS Transp. L.A., LLC, No S204032 (Cal. June 23, 2014) upholding a class action waiver in a dispute resolution policy. A summary of that decision can be found here.
On the same day, the U.S. Court of Appeals for the Ninth Circuit issued two decisions upholding collective and class action waivers in employment contracts in Johnmohammadi v. Bloomingdale’s Inc., No. 12-5578 (9th Cir. June 23, 2014) and Davis v. Nordstrom, Inc., No. 4:11-cv-03956-CW (9th Cir. June 23, 2014). Taken together, these three rulings suggest that properly drafted arbitration provisions—including waivers on class action litigation and classwide arbitration of employment claims—will likely be enforced when they are provided to employees with reasonable notice. At the same time, after Iskanian, employers can likely expect an increase in representative claims brought under California’s Private Attorneys General Act. Here’s a brief summary of the Ninth Circuit decisions:
Johnmohammadi v. Bloomingdale’s Inc.
Bloomingdale’s informed its employees that they agreed to resolve employment-related disputes through individual arbitration unless they “opted out” within 30 days. An employee, who had not opted-out, brought a purported class action to recover unpaid overtime wages. The employer argued that the dispute resolution program precluded class action litigation, and that the employee’s individual claims must be arbitrated. The district court granted the employer’s motion to compel arbitration and on appeal, the Ninth Circuit held the arbitration provision was enforceable under California law. After concluding that the employee was “fully informed” of the consequences of declining to opt out of the arbitration requirements, the court found that neither the Norris-LaGuardia Act nor the National Labor Relations Act (NLRA) precluded an employee from waiving his or her right to litigate claims on a classwide basis.
Davis v. Nordstrom, Inc.
Following the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the employer revised its employee arbitration policy contained in its employee handbook. The change precluded employees from bringing most class action lawsuits. The employer provided its employees with written notice of this change and did not enforce the new policy for 30 days to allow employees to consider the change and decide whether to continue employment. The Ninth Circuit found the amended arbitration provision, including the class action waiver, was enforceable. The court further held that the employer was not required to inform the employees that continued employment after receiving notice of the policy change constituted acceptance of the new terms of employment.
After Iskanian, Johnmohammadi and Davis, California law is clear that employees can waive their opportunity to litigate claims on a classwide basis in favor of individual arbitration and that companies doing business in California can mitigate the risk of facing class action litigation by including class waivers in properly drafted arbitration agreements.
Employers should carefully consider whether to utilize mandatory arbitration provisions, including the manner they provide employees with notice of revisions to existing arbitration agreements or new arbitration agreements. If the trends in Davis and Johmohammadi continue, employers with arbitration provisions will likely see a decrease in the number of class action claims but will likely see an increase in representative Private Attorneys General Act claims, which Iskanian held cannot be waived.