Class Action Waivers Good in California, PAGA Waivers Perhaps

by Littler

In an important decision on employment arbitration agreements with pre-dispute class and collective action waivers, in Iskanian v. CLS Transportation of Los Angeles1 the California Supreme Court held that U.S. Supreme Court precedent abrogated the California Supreme Court's prior decision in Gentry v. Superior Court,2 and that a state's refusal to enforce a class waiver on grounds of a state public policy or unconscionability is preempted by the Federal Arbitration Act. The California Supreme Court likewise rejected the argument that a class waiver is unlawful under the National Labor Relations Act. However, the state high court also held that neither Supreme Court precedent nor the FAA preempts state law that prohibits waiver of an employee's right to bring a "representative" action under California's Private Attorneys General Act. 

Iskanian arose out of a putative class and representative action by a limousine driver against his former employer, a transportation company, alleging various wage and hour violations. The company initially moved to compel arbitration based on an arbitration agreement signed by the driver during his employment that contained a class and representative action waiver. The company later withdrew its motion after the California Supreme Court issued its decision in Gentry, which held that a class waiver would not be enforced if it would undermine the vindication of employees' unwaivable statutory rights.3 The company later renewed its motion after the U.S. Supreme Court issued its 2011 decision in AT&T Mobility LLC v. Concepcion.4 The driver opposed the motion claiming the class and representative action waiver was nevertheless unenforceable and the company had waived its right to compel arbitration. 

The trial court granted the company's renewed motion, and the California Court of Appeal affirmed. The appellate court held that despite the public policy served by the PAGA, the FAA, as interpreted by Concepcion, requires enforcement of agreements waiving PAGA actions.5 Moreover, the court of appeal held, Concepcion overruled the Gentry Rule, which states that California's interest in classwide resolution of employees' wage and hour claims, in many circumstances, trumps a class action waiver in a FAA-governed arbitration agreement.6

Gentry relied on the California Supreme Court's earlier decision in Discover Bank v. Superior Court, which held that state public policy supported the availability of classwide relief for small, individual fraud claims and trumped an arbitration clause that required bilateral, nonclass arbitration. Concepcion, however, overruled Discover Bank, holding that the FAA preempts state laws that condition enforceability of certain arbitration agreements on the availability of classwide arbitration procedures. In finding that Gentry was no longer good law after Concepcion, in Iskanian the court of appeal reasoned that the FAA preempts state law rules, whether court or legislatively made, that impose obstacles to the enforcement of FAA-governed arbitration agreements. According to the court of appeal, despite the fact that PAGA actions, unlike class actions, are "law enforcement actions" designed to protect the public, Concepcion's broad pronouncement that FAA-governed arbitration agreements must be enforced according to their terms applied to PAGA claims. 

In the California Supreme Court opinion, authored by Justice Goodwin Liu, the majority agreed with the court of appeal that Concepcion abrogated Gentry and other earlier California Supreme Court precedent to the extent that such prior authority allowed California courts to refuse to enforce class waivers on grounds of public policy or unconscionability. "Concepcion held that because class proceedings interfere with fundamental attributes of arbitration, a class waiver is not invalid even if an individual proceeding would be an ineffective means to prosecute certain claims," the majority said. Thus, in light of Concepcion, the FAA preempts the Gentry Rule that the validity of a class waiver turns on whether individual arbitration or litigation could be designed to approximate the advantages of a class proceeding.

The majority's opinion also rejected the plaintiff's argument that Gentry survived Concepcion based on the California Supreme Court's decision in Sonic-Calabasas A Inc. v. Moreno.7 The court distinguished the principles articulated in Sonic II from Gentry, stating: "Sonic II recognized that the FAA does not prevent states through legislative or judicial rules from addressing the problems of affordability and accessibility of arbitration. But Concepcion held that the FAA does prevent states from mandating or promoting procedures incompatible with arbitration. The Gentry Rule runs afoul of this latter principle." 

In upholding the validity of class waivers, the court joined a wide majority of other courts and further rejected the argument that the NLRA renders class waivers unenforceable, a position adopted by the National Labor Relations Board in D.R. Horton Inc. v. NLRB.8 The court also held that the company, by withdrawing its motion to compel because it believed it was unenforceable under Gentry, did not waive its right to enforce the arbitration agreement when Concepcion's pronouncements later made clear that it was enforceable. 

The California Supreme Court's majority opinion, however, disagreed with the court of appeal regarding the enforceability of the PAGA waiver, holding that "the FAA's goal of promoting arbitration as a means of private dispute resolution does not preclude [California's] Legislature from deputizing employees to prosecute Labor Code violations on the state's behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract." 

Despite finding that the FAA requires enforcement of pre-dispute class waivers, the majority concluded that an employer could not require an employee to waive the right to bring a PAGA representative action, at least pre-dispute. The majority examined the purpose of PAGA and distinguished the substantive right to bring a PAGA representative action from the class action procedure. The PAGA allows private citizens to seek civil penalties on behalf of California's Labor and Workforce Development Agency, with 75 percent of such penalties going to the state agency and 25 percent to the employee bringing the action and the group of employees the private litigant purports to represent. "PAGA was clearly established for a public reason, and agreements requiring the waiver of PAGA rights would harm the state's interests in enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter violations," the court noted. While the majority seemingly left open the issue of whether an employee could forgo his or her right to bring a PAGA action after he or she becomes aware of Labor Code violations, the court stated that "it is contrary to public policy for an employment agreement to eliminate this choice altogether by requiring employees to waive the right to bring a PAGA action before any dispute arises." 

The majority determined that the FAA does not preempt its decision that PAGA waivers are contrary to public policy and thus unenforceable as a matter of state law because "the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the state Labor and Workforce Development Agency." Because PAGA deputizes employees to act on behalf of the state, representative actions under PAGA, the court said, enforce the state's interest in penalizing and deterring employers who violate California's labor laws. Unlike class actions for damages, PAGA representative actions do not involve the bilateral arbitration of private disputes between employers and employees which the FAA was intended to cover. 

The California Supreme Court also rejected the company's argument that the PAGA violates the principle of separation of powers under the California Constitution. 

The full impact of the court's decision regarding PAGA waivers is not yet known. While Iskanian makes clear that mandatory pre-dispute PAGA waivers are invalid in California, the decision can be read to leave open the door to both post-dispute PAGA waivers and pre-dispute PAGA waivers so long as they are not compulsory.

1 Case No. S204032 (2014).

2 42 Cal. 4th 443 (2007).

3 Id. at 458-59.

4 563 U.S. 321 (2011).

5 Iskanian v. CLS Transp. Los Angeles, L.L.C., 206 Cal. App. 4th 949, 965 (2012).

6 36 Cal. 4th 148 (2005).

7 57 Cal. 4th 1109 (2013).

8 737 F.3d 344 (5th Cir. 2013).

Written by:


Littler 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.