The California Supreme Court this week confirmed the validity of an employee’s waiver of the right to bring a class action contained in an arbitration agreement. That’s the good news for employers. However, the court also held that these arbitration agreements may not include a waiver of an employee’s right to bring representative claims under the Private Attorney General Act (PAGA), found at Section 2698-99 of the California Labor Code. That is not good news and employers should expect to see more PAGA claims. Under PAGA, an employee steps into the shoes of the state labor law enforcement agencies to recover penalties on behalf of the employee and his/her co-workers for state law wage and hour violations. The employee must send 75 percent of the penalties recovered to the state, and gets to keep the other 25 percent. In traditional class actions, the entire recovery goes to the employees. Claims under PAGA can still be litigated in the courts, leaving employers exposed to two potential tracks of litigation over the same alleged workplace violation. The California Supreme Court also left undecided which gets litigated first—the individual arbitration or the PAGA claim. This decision is likely go to the U.S. Supreme Court, which has the final say under the Federal Arbitration Act. For now, however, waiver of PAGA claims will most likely not be enforced in California.

Iskanian v. CLS Transportation Los Angeles, LLC, S204032 (Cal. June 23, 2014).