Ninth Circuit Blesses Iskanian

by Sheppard Mullin Richter & Hampton LLP

On September 28, 2015, the Ninth Circuit Court of Appeals issued a 2-1 decision in the long-awaited case of Sakkab v. Luxottica Retail North America, Inc. (No. 13-55184, D.C. No. 3:12-cv-00436-GPC-KSC) (“Sakkab”). The Court held that an arbitration agreement that requires arbitration of PAGA claims arising out of employment is unenforceable under California law.

Employer’s Arbitration Agreement

Luxottica, which operated several eyewear retail stores, distributed a Retail Associate Guide to its employees upon hire. The Retail Associate Guide contained a dispute resolution agreement, which read:

You and the Company each agree that, no matter in what capacity, neither you nor the Company will (1) file (or join, participate or intervene in) against the other party any lawsuit or court case that related in any way to your employment with the Company or (2) file (or join, participate or intervene in) a class-based lawsuit, court case or arbitration (including any collective or representative arbitration claim).

The plaintiff brought a putative class action in state court against Luxottica for (1) unlawful business practices; (2) failure to pay overtime compensation; (3) failure to provide accurate itemized wage statements; and (4) failure to pay wages when due. After the case was removed to the federal district court, the plaintiff later filed an amended complaint, adding a representative claim for penalties under California’s Private Attorney General Act (“PAGA”). Under PAGA, employees may sue their employer for certain workplace violations on behalf of themselves, as well as other current or former employees, in representative suits similar to class actions.

Employer’s Motion to Compel

Luxottica sought to compel arbitration of all of the plaintiff’s claims pursuant to the agreement. The plaintiff did not contest the arbitrability of his first through fourth claims. The plaintiff, however, argued that an individual’s right to bring a representative PAGA claim could not be waived in an arbitration agreement under California law. The portion of the agreement that prohibited him from bringing any claims on behalf of other employees, the plaintiff argued, was therefore unenforceable.

The district court acknowledged a split in California authority, but ultimately ruled that the Federal Arbitration Act (“FAA”) preempted any California rule that barred waiver of PAGA claims in arbitration agreements. As such, the court granted Luxottica’s motion to compel arbitration.

Employee’s Appeal

Following the district court’s ruling, but before the appeal, the California Supreme Court announced its decision in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) (“Iskanian”), which held that employees could not waive their right to bring representative claims under PAGA.

On appeal of Sakkab, the Ninth Circuit Court of Appeals preliminarily held that the FAA did not preempt the Iskanian rule because the rule fell within the purview of the FAA’s “saving clause.” The FAA provides that arbitration agreements are generally valid and enforceable. The FAA will preempt any state law that conflicts with the FAA or stands as an obstacle to the purposes and objectives of the FAA. However, an arbitration agreement may still be invalidated “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under this “saving clause,” arbitration agreements may be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability. The Court acknowledged that the FAA would preempt any state law that singled out arbitration agreements for special treatment. However, the Iskanian rule barred any waiver of PAGA claims, regardless of whether the waiver appeared in an arbitration agreement or a non-arbitration agreement. As such, the Iskanian rule fell within the FAA’s saving clause and was not preempted.

The Court further held that the FAA did not preempt the Iskanian rule because the Iskanian rule did not conflict with the FAA’s general purposes. The rule did not evidence judicial hostility toward arbitration and did not prohibit arbitration of PAGA claims; the rule merely provided that representative PAGA claims could not be waived outright.

Finally, citing general preemption principles, the Court noted that PAGA is part of California’s legislative scheme for enforcing the Labor Code, which falls within the state’s police powers. The Court also endorsed the view that a PAGA claim is a qui tam action, and “the FAA was not intended to preclude states from authorizing qui tam actions to enforce state law.”

As such, the Court followed the Iskanian decision in holding that an arbitration agreement that requires individual arbitration of all claims arising out of employment is unenforceable as applied to PAGA claims.

*          *          *

The decision in Sakkab is significant because it acts as confirmation that the decision in Iskanian is binding law. Until now, federal district courts were not bound by Iskanian, and several district courts even refused to apply Iskanian, instead requiring employees to arbitrate their PAGA claims on an individual basis. The Ninth Circuit decision in Sakkab, however, leaves courts little discretion in refusing to follow Iskanian. It is incumbent upon California employers to ensure their arbitration agreements are compliant with Iskanian, Sakkab, and the cases that will undoubtedly follow.

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.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP 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.