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ACC Files Amicus in Landmark CA Supreme Ct. Employment Arb. Case

By William Peacock, Esq. on May 28, 2013 3:58 PM

Arshavir Iskanian was a limo driver for CLS Transportation in Los Angeles. In an unremarkable turn of events, the relationship soured and Iskanian sued, alleging labor law violations, specifically a failure to pay overtime, provide breaks, and reimburse employee expenses.

Despite an arbitration clause in his employment contract, Iskanian sued under California’s Private Attorneys General Act of 2004 (PAGA), which allows private parties to bring suit on behalf of the state’s department of labor for violations of labor laws. California quite cleverly provides a bounty to aggrieved employees. The employee sues on the state’s behalf, and if they win, they keep 25 percent of the recovery from the PAGA claims (plus whatever they’d get from their own claims).

Gentry Overruled?

Gentry v. Superior Court was a nice, mushy decision. The essence of the holding was that sometimes, maybe, class-action waivers in employees' overtime cases can be unconscionable. A court must determine whether the waiver prevents employees from vindicating their rights.

Iskanian is already familiar with Gentry. Initially, the trial court found the arbitration clause enforceable, but the appellate panel reversed, telling the trial court to reconsider in light of Gentry.

The trial court did just that, and eventually certified a class. However, after Concepcion was decided by SCOTUS, the trial court reconsidered and sent the case to arbitration. The appellate panel affirmed. Now the California Supreme Court is set to decide the case, asking:

  1. Did AT&T Mobility LLC v. Concepcion (2011) impliedly overrule Gentry v. Superior Court (2007) with respect to contractual class action waivers in the context of non-waivable labor law rights?
  2. Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004
  3. Did the defendant waive its right to compel arbitration?

The ACC Amicus

For those unfamiliar with the Association of Corporate Counsel, they are a private bar made up of in-house attorneys. They are advocates for the causes of the corporate counselor, from controlling outside counsel fees to ensuring enforceable arbitration clauses.

Their amicus brief makes three major points: arbitration controls costs, California is huge, and federal law preempts state law.

The brief begins by testing its own statement that the benefits of arbitration can't be overstated. There are more than a dozen pages of studies showing that, obviously, arbitration is cheaper for employers.

That's followed by the "as goes California" argument. This is a big state, with 12 million people, 12 percent of the nation's population, and over 13 percent of the nation's GDP. If this state weakens arbitration agreements, business here suffers, companies have to draft different contracts for different states, and other states with laws similar to the PAGA might follow suit.

Finally, they finish with the strongest point: federal law preemption. Not only should the Federal Arbitration Act carry more weight than Gentry, but Concepcion also indirectly overrules it. The path of federal law is clear: arbitration clauses, absent utter unconsionability, will be enforced.

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