CDF Wage and Hour Task Force – Monthly Tips (February 2023)
Topics: Arbitration Agreements, Wage & Hour Issues
This is the second post of a new monthly series of CDF’s Labor & Employment Law Blog providing California employers with wage and hour compliance tips and best practices.
On the heels of the Ninth Circuit’s decision blocking California’s bar to mandatory arbitration agreements, as reported earlier this month in the CDF blog and the United States Supreme Court’s ruling in Viking River Cruises v. Moriana, effectively permitting arbitration of individual Private Attorneys General Act (PAGA) claims, many California employers previously reluctant to roll-out mandatory arbitration agreements given uncertainties in developing case law are now re-considering this decision. California employers with existing arbitration agreements are, or at least should be, reviewing and likely revising existing agreements to comport with recent case law to ensure continued enforcement.
In wage and hour litigation, one of the primary benefits of having an arbitration agreement is the ability to include a class and representative action waiver, thereby requiring an employee to arbitrate his or her individual wage and hour claims, in addition to other purported employment-related disputes (except sexual harassment/assault), in arbitration rather than facing defense of alleged class action or representative/PAGA claims in court. The enforceability of such waivers is an incredibly important and valuable weapon/shield for California employers who are faced with class and PAGA claims filed in court.
That said, and as mentioned in the blog post earlier this month, there are pros and cons to arbitration agreements. Here are some of the pros and cons that employers must consider carefully:
| PROS | CONS |
| Obtain class and representative action waivers. | May result in multiple individual wage and hour claims in arbitration. |
| Avoid class actions. | Employer bears the cost. |
| *May avoid representative PAGA claims entirely if anticipated case law is decided favorably for employers. | May impact employee morale. |
| Avoid a public jury trial (except in sexual harassment/assault cases). | Requires careful implementation and communication. |
| May help achieve favorable settlements. | May result in less favorable settlements. |
*The Supreme Court of California, in the matter of Adolph v. Uber Technologies, Inc., will be deciding whether an aggrieved employee who has been compelled to arbitrate claims under PAGA that are “premised on Labor Code violations actually sustained by” the aggrieved employee maintains statutory standing to pursue “PAGA claims arising out of events involving other employees” in court or in any other forum the parties agree is suitable, such as arbitration.
The primary benefit of arbitration agreements for wage and hour litigation – class and representative/PAGA action waivers – may be diminished if it is not implemented carefully. Moreover, as the law on arbitration agreements continues to evolve, the language contained in arbitration agreements must be carefully crafted to help ensure enforceability.
While a mandatory arbitration agreement program may be beneficial to many California employers in avoiding the costly defense of class or representative actions in court, it is imperative that such agreements are current, legally enforceable, and can be authenticated to actually utilize this benefit in wage and hour litigation. Arbitration agreements, however, are not a panacea and the pros and cons of arbitration in California should be considered when deciding whether to implement an arbitration agreement program.
The benefits of any arbitration agreement program necessarily rely on the ability to consistently enforce such agreements, and therefore it is important that you consult with outside employment counsel to ensure that any arbitration agreements are current in light of recent case law developments and rolled-out to employees in a manner and method that is legally defensible, if later challenged.
If you have any questions about this blog post or would like to schedule a wage and hour compliance check, please contact the authors of this article, Nancy “Niki” Lubrano or Brian Cole, or your favorite CDF attorney.
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