State Supreme Court Rules Class Action Waivers Enforceable

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Employers Can Now Force Individual Arbitrations of Employee Wage and Hour Claims

Class action arbitration waivers are enforceable under the Federal Arbitration Act, the California Supreme Court recently ruled in its long-awaited decision in Iskanian v. CLS Transportation Los Angeles, LLC. The ruling overturned the Court’s earlier ruling in Gentry v. Superior Court, and is a major victory for California employers, who will now have the ability to force employees to arbitrate wage and hour claims only on their own behalf.

The Court also held that the National Labor Relations Act’s protection of “concerted activity” does not prohibit class action waivers. However, the ruling was not a complete victory for employers, as the Court also held that employers could not, through pre-dispute arbitration agreements, require employees to waive their ability to bring “representative actions” brought under California’s Private Attorney General Act.

This ruling does give California employers 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. For that reason, employers who already have arbitration agreements in place should review them to make sure they contain proper class arbitration waivers. For employers who have yet to adopt arbitration agreements at all, the Iskanian decision just might provide the right incentive to do so.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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