Public policy considerations no longer a bar to enforcement of class action waiver in employment arbitration agreement

June 19, 2012
By Justice Steven Vartabedian (Ret.) on June 19, 2012 3:53 PM |

publicpolicy_forum_300x300px.jpgAT&T Mobility LLC v. Concepcion (2011) __ U.S.__ [131 S. Ct 1740] changed the legal landscape concerning class arbitrations. The United States Supreme expressly overturned the California Supreme Court ruling in Discover Bank v. Superior Court (2005) 36 Cal.4th 153, which had held that class action waivers in contracts of adhesion subject to arbitration are unenforceable.

A more recent California Supreme Court opinion--Gentry v. Superior Court (2007) 42 Cal. 4th 443--is not referenced in Concepcion. having lead some to believe Gentry is still viable. (See Kinecta Alternative Financial Solutions, Inc v. Superior Court (Malone) (2012) __Cal.App.4th__.) Gentry determined that, under some circumstances, a class arbitration waiver would impermissibly interfere with an employee's ability to vindicate unwaivable rights concerning overtime laws, and that such a waiver was contrary to public policy. The case to be discussed, Iskanian v. CLS Transportation, LLC (filed June 4, 2012) 2012 DJDAR 7371, finds that the Concepcion decision conclusively invalidates Gentry.

Plaintiff Iskanian worked as a driver for the defendant transportation company. After about 9 months of employment, in December 2004 he signed an arbitration agreement that any and all claims arising out of employment would be submitted to binding arbitration and that class claims could not be asserted. The employment concluded in August 2005, and plaintiff filed a break/wage-and-hour class action lawsuit in August 2006. The order appealed from is the trial court's order compelling arbitration and dismissing class claims. Plaintiff claims he can meet the Gentry test to invalidate the class waiver, or alternatively he should not be compelled to arbitrate. The Court of Appeal, Second Appellate District, Division Two found Gentry inapplicable and affirmed.

In addition to finding that Concepcion invalidated Gentry, the appellate court stated that the public policy rationale upon which Gentry was based cannot be considered consistent with Concepcion's stated objective of enforcing arbitration agreements according to their terms; class arbitration procedures should not be imposed on parties who never agreed upon them. And because this matter involves analysis of the effect of federal law, the FAA, on a state rule, the court must follow the U.S. Supreme Court's lead.

The appellate court additionally noted the NLRB case of D.R. Horton finding that an agreement requiring individual arbitration to the exclusion of class arbitration violated the NLRA was of no avail because the FAA is not a statute the NLRB is charged with interpreting. Nor was plaintiff's reliance on a recent California appellate case, Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, stating the public right to class action under California's Private Attorney General Act trumped Concepcion, persuasive. The U.S. Supreme Court will not be trumped.

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