On August 31st, the California Legislature passed a new bill (AB 465) to ensure that waivers of employment rights and procedures, often through arbitration agreements, are made voluntarily and not as a condition of obtaining or keeping employment. As the Wall Street Journal recently reported, the number of companies using arbitration agreements in the workplace
Arbitration Agreements Can Backfire on Employers
It is no secret that arbitration agreements may greatly reduce the risks that many employers face in disputes with employees. For example, when used correctly, such agreements can curb exposure to class actions by forcing employees to arbitrate disputes on an individual basis instead of a class basis. See, e.g., Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014).
However, when such an agreement either contains certain language or fails to include other language, it may result in a class action or a representative action being litigated in front of an arbitrator instead of a court. This can be problematic for many reasons, not the least of which is that an arbitrator’s hourly charges typically are paid by the employer – and those fees can add up quickly in a complicated matter involving numerous parties.
Thus, instead of decreasing the cost of defending a class action or a representative action, a poorly drafted arbitration agreement could result in greatly escalating such costs. A pair of recent decisions from the California Court of Appeal for the Fourth Appellate District (in San Diego) underscore the need for employers to use great care in drafting such agreements to avoid such outcomes.
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U.S. Supreme Court Declines Review of California’s Iskanian Decision – California State and Federal Courts Remain Divided on PAGA Waivers
The U.S. Supreme Court has declined to review California high court’s landmark decision in Iskanian v. CLS Transportation Los Angeles, which held that arbitration agreements with mandatory class waivers are generally enforceable, but carved out an exception for the state’s Private Attorney General Act (“PAGA”) claims.
As discussed in our prior blog post, The
The New PAGA-Waiver Trap Door
Many employers have arbitration agreements wherein employees agree to waive the right to file a lawsuit against the employer under various laws, including the California’s Private Attorney General Act (“PAGA”). Employers were disappointed when the California Supreme Court ruled last June that such waivers of PAGA lawsuits are invalid, at least in state court. See Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014).
However, a number of federal trial judges in the Golden State subsequently disagreed and ruled that PAGA waivers are enforceable in their courts. See, e.g., Ortiz v. Hobby Lobby Stores, Inc., E.D. Cal. Case No. 2:13-cv-01619 (Sept. 30, 2014). Because a PAGA waiver still may be enforceable against an employee in federal court, many employers have either kept or inserted such waivers in their arbitration agreements.
This week it became apparent that including a PAGA waiver may destroy an employer’s ability to require arbitration in any type of lawsuit, be it under PAGA or some other theory (e.g., alleged discrimination, harassment, retaliation, or wage-and-hour or meal-and-rest-period violations). Specifically, the California Court of Appeal ruled that a PAGA waiver will invalidate an entire arbitration agreement in state court if that agreement also includes a non-severability clause. See Montano v. The Wet Seal Retail, Inc., Cal. Ct. App. Case No. B244107 (Jan. 7, 2015).
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Really? Again? – Another California Case Finds that the Parties’ Arbitration Agreement Will Not Govern their Dispute -in this Case a Dispute Centered on Whether or Not the Workers Were Independent Contractors or Employees
By: Lizbeth V. West, Esq.
There is a relatively long list of California cases that stand for the proposition that certain types of employment disputes are not subject to arbitration. On October 17, 2012, the Second District Court of Appeal’s decision in Elijahjuan et al v. Superior Court of LA County (Mike Campbell & Associates, Ltd., et al., as real parties in interest – referred to herein as “Defendants”) added to that list disputes between parties as to whether or not workers are in fact employees rather than independent contractors.Continue Reading Really? Again? – Another California Case Finds that the Parties’ Arbitration Agreement Will Not Govern their Dispute -in this Case a Dispute Centered on Whether or Not the Workers Were Independent Contractors or Employees