Class Waiver Upheld by California Court Post-AT&T v Concepcion
A California court ruled yesterday that a class waiver in an employment arbitration agreement was enforceable in a wage and hour putative class action. This is the first published California decision addressing the issue since the United States Supreme Court issued its decision in AT&T Mobility v. Concepcion and held that the Federal Arbitration Act preempts state unconscionability rules interfering with enforceability of arbitration agreements.
In Brown v. Ralphs Grocery Co., the court addressed whether plaintiffs, who sought to represent a class of current and former employees suing for various wage and hour violations, could be compelled to arbitrate their claims on an individual basis as a result of a class action and representative action waiver in the company’s arbitration agreement. Importantly, the plaintiffs alleged claims for violation of various Labor Code provisions, a piggy back claim for violation of the unfair competition law, and a representative action under PAGA. In passing on the enforceability of the class action waiver, the court applied the framework for enforceability set forth by the California Supreme Court in Gentry. The court held that Gentry requires the plaintiffs seeking to avoid the class action ban to make an evidentiary showing under Gentry as to why enforcing the class waiver would amount to a waiver of statutory rights. The court took the easy way out and held that the plaintiffs had failed to make any evidentiary showing upon which the court could find the class waiver to result in a waiver of statutory rights. On this basis, the court held that the class action waiver was not unenforceable. The court refused to decide whether AT&T v Concepcion separately mandated a finding of enforceability of the class action waiver based on preemption by the FAA. The court essentially punted the issue, though dropping an interesting parenthetical hinting its belief that had plaintiffs satisfied the Gentry standards, AT&T might not require preemption and enforceability because Gentry is concerned with waiver of statutory rights and not just unconscionability, which was the focus of the AT&T case. (In this author’s opinion, this type of effort to distinguish Gentry from AT&T Mobility is a stretch.)
Although the court held that the class action waiver was enforceable as to the class claims, the court decided differently as to the PAGA claim, which is a “representative” claim, not a class claim. As to that claim, the court held that the arbitration agreement’s ban on representative actions was not enforceable and that AT&T Mobility v. Concepcion did not apply to this type of waiver. The court relied on the intent behind PAGA to essentially allow private enforcement actions to be maintained without satisfying class certification requirements, with the goal of furthering enforcement of state wage and hour laws. The court held that AT&T Mobility applies to consumer cases brought as class actions and not to private enforcement actions. The result? Expect wage and hour cases to universally include PAGA claims going forward, in an effort to thwart preclusion of pursuit of classwide relief.
Stay tuned for more developments in this arena, which will surely be the subject of much litigation in the coming year.