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Employers Should Now Run—Not Walk—Toward Adopting Arbitration Agreements in California

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 representativeaction 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 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 will survive and probably 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).

© 2014 Proskauer Rose LLP.

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About this Author

Anthony J Oncidi, Employment Attorney, Proskauer Rose Law Firm
Partner

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office. Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection....

310.284.5690
Laura Reathaford, Employment Attorney, Proskauer Rose Law Firm
Special Employment Law Counsel

Laura Reathaford is a Special Employment Law Counsel in the Labor & Employment Law Department of Proskauer's Los Angeles office. Laura's practice focuses on management-side employment litigation, with a particular emphasis on wage and hour collective and class actions, including representative actions under the Private Attorney General Act (“PAGA”).

310.284.4564
Keith Goodwin, Proskauer Rose Law Firm, Labor Employment Attorney
Associate

Keith Goodwin is an Associate in the Labor & Employment Department, resident in the Los Angeles office.

310-284-4577