Tuesday, June 24, 2014
Right to Sue Under State Private Attorney General Act Cannot Be Waived by Employment Contract, Court Says
By KENNETH OFGANG, Staff Writer
An employment agreement may preclude class actions and classwide arbitration claims, but not representative actions under the Labor Code Private Attorney Generals Act of 2004, the California Supreme Court ruled yesterday.
In a 6-1 decision, the justice affirmed in part and reversed in part a Court of Appeal ruling that had barred Arshavir Iskanian, a driver for CLS Transportation Los Angeles, LLC, from litigating or bringing a classwide arbitration claim or PAGA action against the company. Iskanian claimed he and other employees had been denied legally required overtime pay and meal and rest periods, among other things.
The high court yesterday upheld the Court of Appeal’s ruling that Gentry v. Superior Court, 42 Cal.4th 443 (2007), which held that class-action waivers in employment arbitration agreements were unenforceable if the underlying claims were for violations of state statutes, is no longer good law. Gentry was abrogated by AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, which held that the Federal Arbitration Act preempted state law barring enforcement of waivers of classwide arbitration, Justice Goodwin Liu wrote for the high court.
Liu went on, however, to hold that the FAA does not render unenforceable a waiver of the employee’s right to sue under PAGA. Court of Appeal panels had been split on the issue.
PAGA allows an employee to bring a qui tam action, suing his or her employer in order to collect penalties for violations of certain Labor Code provisions if the Division of Labor Standards Enforcement does not.
Liu said an employee cannot contract away the right to bring a PAGA action because the action is brought on behalf of the state, which is not a party to the contract.
“Of course, any employee is free to forgo the option of pursuing a PAGA action,” he wrote. “But it is against public policy for an employment agreement to deprive employees of this option altogether, before any dispute arises….The question is whether this public policy contravenes the FAA. Nothing in the text or legislative history of the FAA nor in the Supreme Court’s construction of the statute suggests that the FAA was intended to limit the ability of states to enhance their public enforcement capabilities by enlisting willing employees in qui tam actions.”
Liu went on to say that Iskanian’s employer did not waive the right to arbitrate by abandoning its efforts to enforce the arbitration clause after Gentry was decided. The justice agreed with federal courts that have held that because it was futile to try to compel arbitration on an individual basis prior to Concepcion, defendants that proceeded to defend cases in court did not waive their right to compel arbitration post-Concepcion.
Liu was joined by Chief Justice Tani Cantil-Sakauye, by Justice Carol Corrigan, and by retired Justice Joyce L. Kennard, sitting on assignment. Justice Ming Chin, joined by Justice Marvin Baxter, concurred separately.
Justice Kathryn M. Werdegar dissented, arguing that enforcement of class waivers in employment cases violates both state and federal labor law.
The case is Iskanian v. CLS Transportation, LLC, 14 S.O.S. 3112.
Copyright 2014, Metropolitan News Company