Iskanian v. CLS Transportation of Los Angeles: Employer’s Perspective

September 2014Articles California Labor & Employment Law Review

David Faustman’s article “Iskanian v. CLS Transportation of Los Angeles: Employer’s Perspective” was published in the September 2014 issue of the California Labor & Employment Law Review.

In Iskanian v. CLS Transportation of Los Angeles, the California Supreme Court followed recent United States Supreme Court decisions, and declared that Gentry v. Superior Court, its prior decision denying the enforceability of class action waivers, was no longer operative law. The court found that the Federal Arbitration Act (FAA) preempts the subject matter, and that federal law requires enforcement of class action waivers. Thus, the court determined that Iskanian must utilize arbitration to pursue his wage and hour claims as a single-party plaintiff. The court also held that the National Labor Relations Act’s protection of “concerted activity” does not prohibit class action waivers. Both rulings are a clear win for employers. There was, however, some not-so-good news for employers.

The court refused to dismiss the companion “representative action” under the California Private Attorneys General Act (PAGA), holding that a waiver of participation in such a case was against California “public policy,” and that Iskanian’s right to bring a representative action under PAGA could not be waived. The employer argued that there was no principled difference between a class action and a PAGA representative action, and that both should be subject to federal preemption.

What the PAGA action will look like on remand remains quite a procedural muddle, which the court did not really try to resolve. In the meantime, employers should continue to seek waivers of class and representative actions in their arbitration agreements, as there is a possibility these issues could come before the United States Supreme Court.