California Supreme Court Upholds Class Action Waivers but Precludes Private Attorney General Claims

On June 23, 2014, the California Supreme Court issued a long anticipated decision in Iskanian v. CLS Transportation Los Angeles, LLC, S20403 upholding the validity of employee class action waivers but carved out an exception for representative actions pursuant to the Private Attorney General Act (PAGA). If the decision stands, class action waivers in valid arbitration agreements will preclude employees from bringing claims against their employer. However, their representative PAGA claims will survive, where a portion of recovery goes to the named plaintiff, and the remainder is paid to the state. In effect, an employee’s individual claims for damages would be subject to an individual arbitration while their PAGA claims would proceed in state or federal court as a representative action. An indirect result of these decisions is that more and more employment and consumer lawsuits are ending up in arbitration. And while arbitration was designed to be faster and less expensive, and has the advantage of avoiding a “runaway jury” award, the arbitration fees, which include the hourly fee of the arbitrator, can often exceed the value of the amount in controversy. Employers must carefully balance each claim presented and proceed accordingly.

* This article was originally published in Managing Automotive. To read the full article, click here.