If Class Proceedings Are Waived In An Arbitration Agreement, Arguments Under Public Policy Or Unconscionability Will Not Prevail.

Citing AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, [179 L.Ed.2d 742], and noting that the United States Supreme Court made it clear that states cannot require a procedure that interferes with fundamental attributes of arbitration, the California Supreme Court addressed whether a state’s refusal to enforce a waiver of class proceedings on grounds of public policy or unconscionability is preempted by the Federal Arbitration Act. The court ruled:  “ We conclude that it is and that our holding to the contrary in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry) has been abrogated by recent United States Supreme Court precedent. We further reject the arguments that the class action waiver at issue here is unlawful under the National Labor Relations Act and that the employer in this case waived its right to arbitrate by withdrawing its motion to compel arbitration after Gentry.”

The employee, however, also sought to bring a class action under the Private Attorneys General Act [Labor Code section 2698; PAGA], which authorizes an action for civil penalties against the employer, with most of the proceeds going to the state. In that regard, the Supreme Court held: “[W]e conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy. In addition, we conclude that the FAA‘s goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state‘s behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.” (Iskanian v. CLS Transportation Los Angeles, LLC (Cal. Sup. Ct.; June 23, 2014) 59 Cal.4th 348, [173 Cal.Rptr.3d 289].)