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Labor and Employment Law Alert - Supreme Court Leaves California’s Carve-Out for PAGA Wage-and-Hour Representative Actions Intact

The U.S. Supreme Court has denied certification of a petition challenging a California Supreme Court ruling that representative Private Attorneys General Act (PAGA) claims cannot be waived in employment arbitration agreements. As a result, California’s carve-out exempting PAGA claims from arbitration agreements remains intact, and employees can continue to bring PAGA representative actions even if they have signed arbitration agreements with class and representative action waivers.

The case at issue, Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), has been closely watched, since the California Supreme Court held that the plaintiff, a limo driver who signed an arbitration agreement that contained a class and representative action waiver, could nevertheless pursue a wage-and-hour representative action against his former employer. In reaching its decision, the California Supreme Court reasoned that PAGA claims are not subject to arbitration agreements, because when bringing such claims, a plaintiff essentially steps into the shoes of the state’s California’s Labor and Workforce Development Agency and is authorized to seek and split any recovered penalties with the state.

In its petition for review, CLS Transportation Los Angeles, LLC argued that in creating a carve-out for PAGA claims, the California Supreme Court had ignored the preemptive effect of the Federal Arbitration Act and the United States Supreme Court’s rulings in AT&T Mobility LLC v. Concepcion, 563 U.S. 321 (2011) and American Express Co. v. Italian Colors Restaurant, 570 U.S. ___ [133 S.Ct. 2304] (2013) – all of which call for arbitration agreements, including those with class and representative action waivers, to be enforced according to their terms. In response, Iskanian argued that the California Supreme Court’s decision, which remanded the case, was not a final decision so was unripe for review and that there was no split in the courts that needed to be addressed.

By denying certification, the U.S. Supreme Court has left California’s PAGA carve-out intact, and California employers should brace for the continuation of representative PAGA court cases notwithstanding otherwise valid arbitration provisions.

For more information, please contact the Barnes & Thornburg attorney with whom you work, or a leader of the firm’s Labor and Employment Law Department in the following offices:

Kenneth J. Yerkes
Department Chair
(317) 231-7513

John T.L. Koenig
(404) 264-4018

David B. Ritter
(312) 214-4862

William A. Nolan
(614) 628-1401

Mark S. Kittaka
Fort Wayne
(260) 425-4616

Robert W. Sikkel
Grand Rapids

Peter A. Morse
(317) 231-7794

Scott J. Witlin
Los Angeles
(310) 284-3777

Teresa L. Jakubowski
Washington, D.C.
(202) 371-6366

Janilyn Brouwer Daub
South Bend/Elkhart
(574) 237-1130

Visit us online at www.btlaw.com or @BTLawLE, and don’t forget to bookmark our blogs at www.btlaborelations.com and www.btcurrents.com.

©2015 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is proprietary and the property of Barnes & Thornburg LLP. It may not be reproduced, in any form, without the express written consent of Barnes & Thornburg LLP.

This Barnes & Thornburg LLP publication should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation. 



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