Yesterday, the California Supreme Court issued its long-awaited decision in Iskanian v. CLS Transp. Los Angeles, LLC, upholding class action waivers in employment arbitration agreements. This means that the U.S. Supreme Court’s 2011 opinion in AT&T Mobility LLC v. Concepcion is to be given full force and effect in the employment setting in California. That said, however, Iskanian distinguishes the right of an employee to bring a representative action under California’s Private Attorneys General Act of 2004 (“PAGA”), and holds that such claims may not be barred in an arbitration agreement.
Iskanian is a favorable decision for employers. First, Iskanian reaffirms that class actions are a procedural device that exist to make the resolution of certain claims more efficient, not a substantive right to which litigants are invariably entitled. Iskanian also rejects the NLRB’s conclusion in D.R. Horton (discussed in detail here) that class action waivers violate employees’ rights under Section 7 of the National Labor Relations Act to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
Additionally, Iskanian confirms that an employer does not waive its right to enforce an arbitration agreement when the law suggests that moving to compel arbitration would be futile. In Iskanian, for example, the employer withdrew its petition to compel arbitration when the California Supreme Court issued its opinion in Gentry v. Superior Court (which made clear that further petition would be futile), and renewed its petition after the U.S. Supreme Court decided Concepcion, which implicitly overruled Gentry. In this context, Iskanian holds that a delay in moving to compel arbitration is permitted so long as it is not unreasonable.
In sum, Iskanian clears the way for employers to enter into enforceable arbitration agreements that also contain class action waivers. Further, employers should know that arbitration agreements also operate as “wolfsbane” in warding off some of the most active members of the Plaintiffs’ bar who simply refuse to take a case to arbitration—they would much prefer to pluck at the heart strings of a sympathetic jury. And, while representative PAGA actions may survive and are likely to multiply in the wake of Iskanian, these actions are subject to a significantly shorter statute of limitations period (one year) as compared to the four year statute of limitations employers typically see in other non-PAGA actions. This means that any putative “representative group” will consist of significantly fewer employees (and possibly less exposure).