2015: In with Arbitration . . . Out with Litigation

In the beginning of the New Year, we look to see what’s in and what’s out, or as Perez Hilton would say, “What’s hot and what’s not.” However, unlike fashion trends, the “what’s in and what’s out” in the legal field could have a detrimental effect on your life, particularly your employment. In 2014, the California Supreme Court, one of the most liberal court systems in the nation, was forced by U.S. Supreme Court precedent to abandon its plaintiff-driven roots in favor of more conservative, defendant-based rulings. In late 2013 and 2014, the court ruled in favor of enforcing arbitration agreements in class action suits involving in wage and hour claims.  Why should you care? The reason why you should care about these two historic decisions is two-pronged. First of all, with these rulings the court has reversed course on decades of prior rulings. Secondly, and most importantly, these rulings will have a detrimental outcome for future litigants, particularly minimum wage workers.

Historically speaking, the demographic of litigants in a class action and wage and hour suits are generally minimum wage workers. In 2014, the most commonly litigated class action suits in California stemmed from violations of meal and rest breaks, rounding policies, overtime, and unpaid work time. These particular types of violations of law disproportionately affect the blue collar worker.  That is because the blue collar worker (as a “non-exempt” employee) is afforded various legal protections in the workplace, such as overtime protections, break and meal period protections, and protections regarding hours worked.  The blue collar worker is therefore particularly succeptible to be affected by abuses that are most suited to be challenged through class action litigation. One result of this is your mailbox being inundated with class action notice postcards inviting you to get a metaphorical piece of a company you may have worked for in the past.  For the reasons explained below, these postcards are likely to come less frequently, as the California Supreme Court and employers have made it more difficult to successfully bring wage and hour class action claims.

Class Action Waivers Are Enforceable

In 2007, the California Supreme Court ruled in Gentry v. Superior Court that class action arbitration waivers were unenforceable, as they deprive workers their employment rights and thus were found to be “unconscionable.” (42 Cal. 4th 443 (2007)).  However, in 2011 the U.S. Supreme Court ruled that the California rule finding class waiver to be unconscionable was preempted by the Federal Arbitration Act and thus invalid. (AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011)). This leads us to 2014, when the California Supreme Court ruled in tandem with the U.S. Supreme Court’s Concepcion rule and essentially “green-lighted” employer-drafted class action arbitration waivers.  (Iskanian v. CLS Transportation of Los Angeles (2014) 58 Cal.4th 348).

With an increasing number of employers utilizing binding arbitration agreements to forbid its employees from pursuing class  actions, the result will likely be millions of workers being deprived of the ability to use the cost-effective and efficient means of class action litigation to obtain justice through the court system.  Rather, workers subject to these arbitration agreements will have to bring their claims individually in front of private judges in a private forum.

Unconscionability and PAGA:  Rays of Hope for Workers

Despite the above, it is not all doom and gloom for class action wage and hour litigation. The California Supreme Court has held that “state courts may continue to enforce unconscionable rules that do not ‘interfere with fundamental attributes of arbitration’.” (Sonic Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1150). The court went further to clarify its remarks by stating that arbitration agreements cannot be “unreasonably one-sided” or they will be held to unconscionable. Id. In other words, the California Supreme Court stated that the lower courts may be able to fight through the strait jacket imposed by the U.S. Supreme Court’s ruling in Concepcion if it found that under state law governing contractual unconscionability, the terms of the particular arbitration agreement at issue were unconscionable.  This requires a careful analysis of the terms of the arbitration agreement at issue and the circumstances under which the agreement was posed to the employee.

The California Supreme Court also acknowledged in Iskanian that a claim brought by an employee under the California Private Attorney General Act (PAGA) could not be waived by an arbitration agreement.  (Id. at 380).  The PAGA allows employees to collect penalties on behalf of the State of California for violations of wage and hour laws against multiple employees.  (Cal. Labor C. Section 2699(a)).  While most of the penalties collected are appropriated to the State of California, a portion is also appropriated to the employees whose rights have been violated.   Thus, the California Supreme Court has saved some form of collective action from the clutches of Concepcion.

What does this mean for the Minimum Wage Worker?

            The U.S. Supreme Court and California Supreme Court have now made it easier for employers to not only avoid class action litigation in court, but class action litigation in any forum by use of a well-crafted arbitration agreement.  Without a legislative solution, these agreements are here to stay.  As a minimum wage worker, you still have remedies for wage and hour violations.  Unfortunately, with an enforcable binding arbitration agreement waiving the right to class action, those remedies will need to be enforced one worker at a time.  That being said, if you believe that rights of multiple workers have been violated by your employer’s unlawful wage and hour practices, it is important to consult with an experienced attorney to determine whether any arbitration agreement you signed is enforceable or unconscionable, or whether there is a viable PAGA claim that can be asserted notwithstanding the agreement.

Lawyer Contact

If you believe your rights have been violated by an employer, or wish to educate or defend yourself as an employer, don’t wait to contact an attorney. An experienced employment law attorney at Brown & Lipinsky LLP can explain your available options and help you understand your rights. Our experienced San Bernardino and Riverside employment lawyers have the necessary knowledge and skill to evaluate your case and provide you with the answers you need to protect your rights. Contact our Chino Hills, California, office today to schedule a consultation with one of our experienced labor and employment litigation attorneys. General email messages may be sent using our “Contact Us” form.

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