California Law on Arbitration Changes... Again

by Carlton Fields

The Latest

The California Supreme Court today confirmed the validity of an employee’s waiver of the right to bring a class action contained in an arbitration agreement.  That’s the good news.  However, the court also held that these arbitration agreements may not include a waiver of an employee’s right to bring representative claims under the Private Attorney General Act (PAGA), found at Section 2698-99 of the California Labor Code. Those can still be litigated in the courts, leaving employers exposed to two potential tracks of litigation over the same alleged workplace violation. 

What is PAGA?   

Under PAGA, an employee steps into the shoes of the state labor law enforcement agencies to recover penalties on behalf of the employee and his/her co-workers for state law wage and hour violations. The employee must send 75 percent of the penalties recovered to the state, and gets to keep the other 25 percent.  In traditional class actions, the entire recovery goes to the employees. In both types of cases, the employee’s attorney can recover “reasonable” fees.

Why does the California Supreme Court ruling treat PAGA claims differently than class action claims - aren’t they the same thing?

No, they are not. To proceed as a class action in state or federal court, the named plaintiffs must surmount several hurdles. Among other things, before a class action will be certified, the plaintiffs must show “commonality,” meaning that there are common questions as to all of the class members that will generate common answers that allow all or portions of the case to be resolved in one stroke. The plaintiffs also must generally show that these common questions that give rise to common answers “predominate” in the case. Additionally, the named plaintiffs and their counsel must show that they are appropriate representatives for the class.  

In a PAGA case, by contrast, the plaintiff need not meet any of the class certification hurdles. Nor must other co-workers be brought into the case. One employee can litigate as a representative for all of affected employees, and the named plaintiff need not share his 25 percent of the penalty award with anyone else.

What should you do with your arbitration agreements now?   

Unclear. Today’s decision is likely to go to the U.S. Supreme Court, which has the final say under the Federal Arbitration Act. For now, however, waiver of PAGA claims will most likely not be enforced in California. If such language is present, there is a risk a California court could invalidate the entire arbitration agreement, which the California Supreme Court did not do in today's decision.

If your agreements don't include a PAGA or representative action waiver, are they enforceable?  

Not necessarily. California courts will still closely scrutinize arbitration agreements. Many have been invalidated because the court found them “unconscionable”  as a result of either their unfair language or circumstances. For example, courts have said provisions that impose more fees and costs on an employee in arbitration than he would have paid to litigate in court are unconscionable, as are provisions that require an employee to submit all claims against the employer to arbitration, while allowing the employer to choose to go to court on claims it may have against the employee. Courts also have turned thumbs-down where the employer has the discretion to use the same arbitrator repeatedly, presumably affecting the arbitrator’s neutrality.  Recently, a California court of appeal refused to enforce an arbitration agreement that was written in English where the employees were Spanish speakers. 

Click here to read the California Supreme Court opinion in Iskanian v. CLS Transportation Los Angeles LLC.

In short, arbitration agreements in California can be important tools that allow employers to resolve wage and hour disputes cost-effectively. But they can present pitfalls, so it is wise to review them regularly with counsel.

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.

© Carlton Fields | Attorney Advertising

Written by:

Carlton Fields

Carlton Fields on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.