Wage & Hour Litigation Blog

No Bones About It: Courts Within Second Circuit Continue to Dismiss “Bare Bones” FLSA Complaints

Posted in Defenses, Overtime

Co-authored by Robert S. Whitman and Howard M. Wexler

Last summer, the Second Circuit issued a flurry of decisions clarifying the pleading standard in FLSA cases.  In one of those cases, Dejesus v. HF Management Services, LLC, the court held that, in order to state a valid overtime claim after the Supreme Court’s decisions in Iqbal and Twombly, “a plaintiff must sufficiently allege 40 hours of work in a given workweek as well as some uncompensated time in excess of the 40 hours.”  The Second Circuit affirmed the dismissal in Dejesus because the plaintiff failed to estimate her hours or provide any factual context for how many hours she worked, and criticized her complaint as merely a “rephrasing” of the FLSA’s requirements made to appear as factual statements.

Picking up where Dejesus left off, Judge Joanna Seybert of the Eastern District of New York last week dismissed a putative class and collective action brought on behalf of automobile damage adjusters under the FLSA and New York Labor Law because “plaintiff pleads no facts that suggest that GEICO failed to pay Plaintiff the proper amount of overtime pay.”  Instead, the plaintiff alleged that GEICO failed to pay him (and the putative class) overtime compensation for the time he worked between 38.75 and 40 hours per week – which by itself “does not state a claim that GEICO failed to pay proper overtime.”  Judge Seybert further dismissed the plaintiff’s off-the-clock claim because the Amended Complaint provided no facts to support it, such as “an estimate of hours Plaintiff failed to report or who allegedly discourage adjusters from reporting overtime.”

This case shows that employers within the Second Circuit continue to reap the benefits of Dejesus and its progeny.  Perhaps the courts’ rejection of bare bones complaints will prod plaintiffs to provide detailed factual allegations – or even decline to sue in the first place – before burdening employers with years of discovery and other litigation costs.

Seyfarth Shaw Attorneys Update Definitive Guide to Litigating Wage & Hour Lawsuits

Posted in Uncategorized

By Seyfarth Shaw LLP

Leading employment law firm Seyfarth Shaw has updated its definitive guide to the litigation of wage and hour lawsuits. Co-authored by three Seyfarth partners and edited by the chair of the firm’s national wage-hour practice, Wage & Hour Collective and Class Litigation is an essential resource for practitioners. The unique treatise provides insight into litigation strategy through all phases of wage & hour lawsuits.

Among many other topics, the treatise’s authors examine how employers in multiple industries are targeted for wage-hour lawsuits and provides substantive procedural and practical considerations that determine the outcome of such actions in today’s courts. Principally designed to assist employment litigators and in-house counsel, the treatise also proves useful to senior management seeking to fend off wage-hour actions before they strike.

Authors Noah Finkel, Brett Bartlett and Andrew Paley, who practice in the firm’s Chicago, Atlanta and Los Angeles offices respectively, as well as Boston-based Richard Alfred, who is Chair of Seyfarth’s National Wage & Hour Litigation Practice Group, are each experienced wage and hour litigators who have handled numerous collective and class actions asserting violations under both state and federal law.

“Recently, we have seen an eruption of wage and hour appellate decisions bound to have a great impact on pending and future litigation,” said Alfred. “Our updated edition arrives at the perfect time for corporations looking for the most current insight and strategy on wage & hour litigation. New trial decisions have touched on class certification, the National Labor Relations Act and employee arbitration agreements in wage and hour lawsuits, among others. This handbook will delve into these new developments and offer practiced litigation advice to all employers navigating this complex space.”

Wage & Hour Collective and Class Litigation covers the complex rules surrounding all types of wage and hour lawsuits. These include claims under the Fair Labor Standards Act, claims under state wage and hour laws, or hybrid cases involving both, as well as special issues involving government contractors. It provides readers guidance around: how to respond to a wage and hour complaint; what to consider when deciding whether to remove a case to federal court; how to assess the particular merits of a claim; whether to settle; how to oppose plaintiffs’ motion to facilitate notice for conditional certification; what kinds of affirmative defenses are best; and how to tilt the odds in favor of the defense.

In its latest update, Wage & Hour Collective and Class Litigation features discussions of recent decisions from appellate and trial courts and their effect on wage and hour litigation, emphasizing the following developments:

  • The continuing impact of Comcast Corporation. v. Behrend on certification of state law wage and hour cases under Rule 23 of the Federal Rules of Civil Procedure.
  • Recent California appellate decisions in the class action context examining: the extent to which merits issues can or should be considered in the class action context; the use of sampling methodologies; and the proper standard to be applied in exempt status cases at class certification.  It should be noted that, after this Release went to press, the California Supreme Court addressed these issues and more in detail in Duran v. U.S. Bank National Association.  This is a very important wage and hour decision and will be addressed in detail in the next Release.
  • The continuing trend of federal and state cases refusing to follow the NLRB’s decision in D.R. Horton which held that requiring employees to waive their right to litigate employment claims in class actions violated the National Labor Relations Act.
  • The Sixth Circuit’s decision on whether arbitrability is an issue for the court or the arbitrator to decide when the arbitration agreement is silent on the question.
  • California appellate court decisions analyzing the circumstances in which employee arbitration agreements are unconscionable under California law.  It should be noted that, once again after this Release went to press, the California Supreme Court issued another important decision, this time addressing unconscionability in the context of employee arbitration agreements and refusing to follow D.R. Horton.  This important decision, Iskanian v. CLS Transportation Los Angeles, LLC, will also be addressed in detail in the next Release.

The 2014 update to Wage & Hour Collective and Class Litigation is published by American Lawyer Media’s Law Journal Press.  It is available online at www.lawcatalog.com.

Two Days Left to Vote for the Wage & Hour Litigation Blog

Posted in Uncategorized

Many of our blog’s authors are from Chicago, where it is said we “vote early and vote often.” You may not be able to vote early, and we don’t (necessarily) advocate that you vote often (nudge, nudge; wink, wink). But through Friday, August 8, you still can vote in the ABA’s annual competition for the 100 best legal blogs by clicking here. When prompted on your ballot, the blog’s address is http://www.wagehourlitigation.com. Simply provide a short explanation of why you like our blog and the value it provides.  For more information on the ABA’s blog vote, click here.

The Second Circuit Finds Entry-Level Accountants To Be Exempt Learned Professionals Under the FLSA

Posted in Misclassification/Exemptions, Overtime

Authored by Gena Usenheimer

Earlier today, in Pippins v. KPMG, the Second Circuit held that entry-level accountants are professionals exempt from overtime under the FLSA.  While the Court’s finding is of great significance to employers within the accounting industry, the decision offers broad guidance as the meaning of the professional exemption generally, guidance which is applicable to employers in all industries.

Briefly, the FLSA’s professional exemption require that an employee’s main or most important duty be the performance of “work requiring an advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.”  Implementing regulations impose a three prong test to determine whether an employee’s primary duty qualifies for the exemption:  1) the work must be predominantly intellectual in character, requiring the consistent exercise of discretion and judgment; 2) the work must be in a field of science or learning (such as accounting), and 3) be of a type where specialized academic training is a standard prerequisite for entrance into the profession.  Because in Pippins there was no dispute that plaintiffs were accountants working a field of science or learning, the Court’s analysis focused on the other two elements of the test.

The bulk of the Court’s analysis focused on the meaning of the “advanced knowledge” prong, specifically, what it means to consistently exercise “discretion and judgment.”  Notably, the Court found that “what matters is whether [employees] exercise intellectual judgment within the domain of their particular expertise” finding the “critical question” to be whether “workers act in a manner that reflects knowledge and requires judgments characteristic of a worker practicing that particular profession.”  The Court also observed that employees may “exercise professional judgment when their discretion in performing core duties is constrained by formal guidelines or when ultimate judgment is deferred to higher authorities.”  With respect to supervision by “higher authorities,” the Second Circuit opined that supervision of junior professionals by their more experienced and senior colleagues is standard operating procedure in many offices and “does not relegate the junior professionals to the role [] of non-professional staff,” especially where the junior employees use professional judgment in determining when to elevate an issue to a supervisor and/or when ask for help.

In addition to the “advanced knowledge” prong, to qualify for the professional exemption employees must also employ advanced knowledge “customarily acquired by a prolonged course of specialized intellectual instruction.”  In exploring the parameters of this so-called “education” requirement, the Second Circuit determined the education requirement is likely met by a few years of relevant training so long as that training is specialized to the job or profession at issue.  (In contrast, generic education requirements, such as a bachelor’s degree in any field, e.g., generally do not meet the requirement.)  The Court then summarily rejected plaintiffs’ argument that they did not meet the education requirement because they learned all necessary skills while on-the-job, finding that KPMG’s “training” materials would not be understandable to “the average classics or biochemistry major” nor could non-accountants “develop the requisite understanding of the audit function, on the basis of the brief training period.”

While the precise implications of the Second Circuit’s guidance won’t be known for some time, many state wage and hour laws closely track the FLSA so we can expect to the decision to have far reaching consequences.

 

Your Help Is Needed – Vote for the Wage & Hour Litigation Blog!

Posted in Uncategorized

The American Bar Association is holding its annual competition for the 100 best legal blogs. Through this competition, the ABA is seeking to identify legal blogs that people in the legal profession should know about.

We would appreciate your support in helping Seyfarth Shaw’s Wage & Hour Litigation Blog recognized more widely.

Wage & Hour Litigation Blog is a resource for employers to stay current on developments in wage and hour law, including recent court decisions, legislative updates, and Department of Labor compliance, rule-making and enforcement activities.

The deadline to nominate the blog is Friday, August 8, 2014.

Click the link to vote by that date. The blog’s address is http://www.wagehourlitigation.com/. Simply provide a short explanation of why you like our blog, and the value it provides.

Hurry over to the polls, and cast your vote!

One of These Things Is Not Like the Others: Some Class Representatives Just Don’t Belong

Posted in Rule 23 Certification

Authored by Brian P. Long

A seemingly never ending wave of call center class actions has been leveled against employers in recent years.  The hallmark of these suits invariably includes allegations of purportedly homogenous “drones” working off-the-clock when they are not helping customers.  Companies are left with few options other than shout into the wind that their policies prohibit such uncompensated work by their varied customer focused workforce.  Unfortunately, too frequently, courts are deaf to the employer’s concerns and certify collective and class actions with little regard to whether the named plaintiffs are “typical,” “adequate,” or even whether there is evidence of common issues among the putative class, other than the well-worn self-serving theories common to each of these suits.  Often enough, with little chance of legitimate policies and genuine differences among their workers carrying the day, companies are forced into expense settlements.

But there is hope, and the waters may be receding.  Bucking the trend, a Maryland federal judge just denied certification of two related putative class action lawsuits brought against Comcast Cable Communications Management, LLC on behalf of Customer Account Executives (“CAEs”) working at two separate locations in Maryland.  CAEs, like most call center employees, provide service and support over the phone to Comcast’s current and prospective customers.  Predictably, the main theory of liability in these cases hinged entirely on an unsupported theory: CAEs needed to perform various tasks including booting up their computers, opening software applications, and reviewing company e-mails off-the-clock so that they would be ready to take calls from customers at the start of their shifts.

Rather than submit and settle following the conditional certification of an FLSA collective action, Comcast kept fighting.  As it turns out, for good reason.  One of the named plaintiffs worked in a position where he did not actually take inbound calls from customers.  The Court found this difference critical: “Thus, plaintiffs’ whole theory of CAEs needing to log in and be ready to receive telephone calls as soon as their shift begins would not be applicable to Faust in the same way as other CAEs.”  But the differences among the purported drones and named plaintiffs did not end there.  A separate named plaintiff only worked 30 hours per week and, thus, would not be due additional overtime even if his allegations were true.  Once again, the Court correctly found that the plaintiffs’ claims failed to meet even the threshold issue of typicality.  Also, the named plaintiffs abandoned related unpaid meal period and off-the-clock post-shift claims without explanation.  The lack of explanation led the Court to conclude that the named plaintiffs were not adequate representatives of the putative class.

Importantly, the Court did not stop its analysis with typicality and adequacy.  Rather than simply accept as true the plaintiffs’ unsupported theory that every CAEs’ claims were the same, the Court held that class-wide issues do not predominate.  In doing so, the Court noted that off-the-clock claims typical to call center actions raise at least four distinct questions: (1) did the employee work overtime?; (2) was the employee paid for that work?; (3) if the employee was not paid, did the employer know, or should it have known that the overtime was worked?; and (4) was the amount of time de minimis?

In addressing these questions, the Court noted that Comcast maintained strict policies forbidding off-the-clock work, and it was not enough for plaintiffs to simply allege employees worked off-the-clock under a recycled theory of liability.  Instead, plaintiffs actually need evidence that Comcast “had some unofficial policy or practice of permitting CAEs to act in contravention of that official policy . . .this unofficial policy must be capable of being demonstrated on a class-wide basis.”  The Court rejected plaintiffs’ contention that once a CAE logged into their computer, Comcast was required to pay them for a continuous workday, noting that several CAEs testified that they would log-in and then get coffee, review personal e-mails, or perform other personal tasks.  Whether the time between the initial log in and the start of the CAE’s shift was actually compensable required an inherently individualized inquiry.  In short, the CAEs are not homogenous drones, but individuals with unique habits and defenses.  Further, the Court noted that uncompensated time under 10 minutes may be de minimis.  As the amount of alleged off-the-clock time worked by CAEs could not be shown by simple reference to the log-in times, there was no way of determining liability on a class-wide basis.  Because Plaintiffs could not show CAEs worked off-the-clock under some nonexistent unofficial policy (let alone the amount of alleged unpaid time), the Court held that the CAEs’ claims were not subject to common proof and certification was inappropriate.  Comcast was heard.

Not stopping there, the Court also took issue with declarations submitted by the plaintiffs’ attorneys purportedly summarizing putative class data that would warrant class treatment.  Rather than retain an expert statistician, the plaintiffs’ attorneys instead took it upon themselves to conduct an analysis of the CAEs’ computer log-in times.  The plaintiffs also submitted an “irrelevant” expert report from another class action pending in a different state.  The Court rejected this approach, as it rejected the unsupported theory of liability, and struck each of the declarations.

The decisions in these cases may signal a sea change.  Companies facing similar suits are not destined to settle simply because mere allegations of a common practice of off-the-clock work are leveled against them.  Lawful policies and legitimate variations between putative class members are not only relevant, but may carry the day.

The 14th Edition of Litigating California Wage & Hour and Labor Code Class Actions Is Here!

Posted in State Laws/Claims

Authored by Christopher A. Crosman

Just in time for the summer beach reading season comes the 14th edition of Seyfarth Shaw’s publication Litigating California Wage & Hour and Labor Code Class Actions. It contains discussion and analysis of the various types of wage & hour class actions that affect many California employers, and has been updated to reflect the latest developments in the law.

Download the searchable, 140-page publication using this convenient link. And get ready to impress family and friends at your next summer barbecue discussion of the nuances of litigating California wage & hour class actions!

Sampling Duran: The California Supreme Court’s Smack Down Of A Biased Sampling Scheme Isn’t Limited To California

Posted in Misclassification/Exemptions

Co-authored by Jacob Oslick and Noah Finkel

Mark Twain famously said that “there are lies, damn lies, and statistics.”  A recent decision by the California Supreme Court provides a good example of why.  In Duran v. U.S. Bank, N.A., the Court put the kibosh on a trial court’s decision — in a wage-and-hour class action — to impose a “trial plan” which accepted evidence based only on a small sample of the class members.  The Court found that the trial court’s sampling plan created huge statistical biases in plaintiff’s favor, while violating the defendant’s due process rights.  We’ve previously discussed DuranWhat employers should realize, however, is that Duran’s reasoning should extend far beyond California state law, and far beyond just the trial management stage.  With plaintiffs across the country hungry like a wolf to short-circuit employers’ due process rights, the California Supreme Court’s decision provides a model that employers can use to fight back certification efforts for FLSA collective actions and state wage-and-hour class actions.

Duran’s reasoning does not depend upon statutory language or precedent specific to California.  Instead, Duran depends upon well-accepted statistical precepts, taught nationwide in our colleges and universities.  These statistical precepts, such as “selection bias” and the “margin of error” apply to all contexts in which sampling is used.  Similarly, by giving defendants the opportunity to impeach a sampling plan, Duran recognized that any sampling plan is just an imperfect model of the real world; it is not religious dogma that must be accepted on faith.  This understanding applies to all sampling models, regardless of whether the context is trial management or something else.  Any time a court uses sampling without employing Duran’s safeguards, it engages in bad science.

This is important, because sampling “is a procedure often used in FLSA actions.” LaFleur v. Dollar Tree Stores, Inc. (E.D. Va. Mar. 7, 2014).  And, while courts have used sampling to streamline FLSA trials, they have also employed sampling at the certification stage, and even to limit a defendant’s discovery rights to a fraction of FLSA opt-in plaintiffs.  See Roussell v. Brinker Int’l, Inc. (5th Cir. 2011) (trial management); Indergit v. Rite Aid Corp. (S.D.N.Y. June 17, 2014) (certification); Smith v. Lowe’s Home Centers, Inc. (S.D. Ohio 2006) (discovery).  Even worse, courts have frequently made the same statistical blunders that Duran rebuked.   In Roussell and Indergit, for instance, the courts permitted the parties to cherry-pick witnesses to form the representative “sample.”  Yet, as Duran showed, such a procedure necessarily creates a biased “sample” of the class, a statistical flaw known as a “selection bias.”  Similarly, in Reich v. S. New England Telecommunications Corp. (2d Cir. 1997), the Second Circuit sustained a verdict predicated on testimony from just 2.5% out of 1500 opt-in plaintiffs, finding that a trial needs to contain only a “very small sample of representative evidence” from collective members.  Yet Reich contained no analysis about the margin of error such a small sample would create (it’s 15.49%, at the standard 95% confidence interval), even assuming the sample was construed in an unbiased, truly representative fashion.

Notably, none of these decisions predicate their reasoning on statutory or regulatory language.  The haphazard sampling procedures they endorse are judge-made.  And what judges make, judges can easily correct or distinguish.  In comes Duran, to explain just why these judge-made rules should be revised.  Indeed, in a world where even expert opinions must conform with solid science under Daubert, it is disappointing that judges have too frequently conjured up trial and discovery plans which limit factual testimony to rigged, biased, or sloppily-constructed unscientific samples.

In short, because good sampling science forms the root of Duran, Duran’s reasoning necessarily applies to any kind of sampling plan — whether proposed at the discovery, final certification, liability, or damages phase — in any court, under any wage-and-hour statute.  For this reason, employers should study Duran carefully when hit with a wage-and-hour class or collective action, and use Duran’s persuasive logic to make shoddy sampling proposals come undone.

To Seek Or Not To Seek (Court Approval)? THAT Is The Question

Posted in Settlement

Co-authored by Rob Whitman, Howard Wexler, and Noah Finkel

Unlike most other causes of action, FLSA claims require court or agency approval before a release can be deemed fully valid and enforceable.  Are there scenarios where it makes sense for employers to “roll the dice” and settle a pending litigation without asking the court to bless the terms of the deal?

The question, which rarely bedeviled litigators when FLSA claims were more of a rarity than they are today, now has enormous practical significance given how many wage-hour lawsuits are filed and the very real prospect that settling one case can lead to a multitude of “copycat” claims.  Outside the FLSA setting, of course, this is a non-issue; parties file a bare-bones Stipulation of Dismissal with the court stating that the claims are dismissed with prejudice, the settlement agreement remains fully confidential, and everyone (including the judge) goes on to the next case.  The defendant need not lose a moment’s sleep worrying that, if the same plaintiff returns with the same claim, the release will be held unenforceable simply because the court never approved its terms.

But under longstanding case law, a release of an FLSA claim requires court (or Department of Labor) approval, even if both sides are represented by sophisticated counsel advocating zealously and ably for their clients.  And obtaining court approval typically requires submitting the settlement agreement to the court on the public docket, with the court’s approval order similarly made public, and can cause weeks of delay in closure of the case.
This presents a host of concerns for defendants.  While potential plaintiffs don’t usually troll the PACER system to find defendants that they think will be easy marks, the same cannot always be said for plaintiffs’ lawyers, many of whom rely on a steady stream of new cases they believe can be quickly settled against defendants that are willing (however reluctantly) to indulge them.  In addition, where the employer is settling with a single individual before anyone else has opted in, it may fear that other potential plaintiffs are “waiting in the wings”—perhaps alerted by the current plaintiff or his/her counsel—to see the value of the settlement in order to decide whether to try their own claim.  And whether or not new cases are filed, an employer does not want adverse publicity associated with the settlement of a case.

Adding to the mix is a more recent trend:  courts are paying increasingly close attention to the terms of FLSA settlements and refusing to approve agreements where they are concerned by, for example, the amount of attorney fees as compared to money going to the plaintiffs, or clauses requiring confidentiality, non-disparagement and no-reemployment.  One federal judge in Tennessee rejected a confidential deal to settle a putative FLSA collective action because the proposed confidentiality clause “contravenes Congress’s intent both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.”  Earlier this week, a California judge refused to approve an agreement because it allowed the employer to keep up to 20 percent of the unclaimed settlement amount, reasoning that this could disincentivize the parties from seeking a high claim rate by class members, and because the attorney fees would remain the same even if few class members participated.

Given the uncertainty of whether a court, if tested, will honor a non-court-approved FLSA settlement, at what point does it make sense for an employer to decide not to seek court approval?

When an employer is particularly worried about bad publicity and “copycat” lawsuits, foregoing court approval and keeping the settlement terms confidential may outweigh the risk of an unenforceable settlement.  Copycat lawsuits typically arise because the plaintiff encourages current or former colleagues to bring their own claims (especially if the defendant settled early and the plaintiff thinks it was “easy money”); and/or because the same counsel wants to pursue the same claim (presumably emboldened by what he/she learned from the first case). Similarly, if the employer places an especially high value on ancillary settlement terms that the court may reject or question, such as no-reemployment and non-disparagement, the risks of seeking court approval may outweigh the benefits.

So what is a settling employer to do?  If it seeks court approval, it will be able to obtain an enforceable release of FLSA rights, but it likely will generate publicity about the settlement and possibly copycat lawsuits.  If an employer does not seek court approval of the settlement, it likely will not obtain a valid release of FLSA rights.

One alternative is to not seek a release.  Instead, an employer and the plaintiffs can agree that the plaintiffs (or all the parties together) will jointly move to dismiss the lawsuit with prejudice.  There likely won’t be a valid release of FLSA rights, but dismissal of prejudice of an FLSA case should mean that the plaintiffs will be barred from a subsequent FLSA suit by operation of claim preclusion principles.  If an employer’s goal is to no longer have to litigate an FLSA dispute with a group of current and/or former employees, then dismissal with prejudice is the “belt,” and a court-approved settlement containing release is merely the “suspenders.”  Only one of them is necessary to keep the pants from falling down.

Many judges, such as Brian Cogan in the Eastern District of New York, have held that court approval of a settlement is not required for dismissal of an FLSA case; lack of approval merely means that a waiver or release is likely void (discussed here).  But other courts have disagreed.  They have held that even if an employer is not seeking an effective release, a judge still must approve the settlement (and usually makes the terms of the settlement publicly available on the docket).  Earlier this year, a federal judge in Missouri observed, “There are good reasons for requiring judicial oversight of private settlements of FLSA claims. Private FLSA settlements are often negotiated with confidentiality provisions that aim to prevent other employees whose FLSA rights may have been violated from learning of the settlement and seeking the same relief.”  And one of Judge Cogan’s Eastern District colleagues, Sandra Townes, noted that “no reported opinion has endorsed Judge Cogan’s position.   To the contrary, one judge in this district has expressly rejected his position, while two others have continued to require court approval for settlements of FLSA actions.”  Some judges in federal courts in Florida have ruled similarly.

So is court approval a necessary evil or something that employers should seriously consider avoiding to reduce the risk of a watered down settlement agreement due to judges who doth protest too much?  As with many questions in the law, the answer is, “It depends.”  But the spate of recent court activity has changed the dynamic on this issue, and employers should no longer assume that every FLSA settlement should or must be submitted for public approval.  Sometimes staying under the radar will make the most sense.  In all cases, the employer must think carefully about its objectives in settling and to its own self be true.

BREAKING NEWS RE CALIFORNIA CLASS ACTION WAIVERS: GENTRY IS DEAD; LONG LIVE PAGA.

Posted in Arbitration Agreements, State Laws/Claims

Co-authored by Colleen Regan and David Kadue

Gentry is dead.  Back in 2007, the California Supreme Court, in Gentry v. Superior Court held that California public policy favoring class actions was so important that employers cannot have employees, in arbitration agreements, waive their right to pursue a class action.  Many thought that the Gentry rule contradicted the Federal Arbitration Act, and further thought that the U.S. Supreme Court so indicated in a 2011 decision, AT&T Mobility LLC v. Concepcion.  But many California courts, post-Concepcion, continued to apply Gentry to invalidate class action waivers in arbitration agreements.  On Monday, however, the California Supreme Court confirmed that the rumors of Gentry’s death were not exaggerated after all:  in light of Concepcion, the Gentry rule really is FAA-preempted.  Iskanian v. CLS Transportation Los Angeles, LLC (Cal. Sup. Ct., filed 6/23/2014).

The Iskanian decision will be welcome news to those employers that wish to limit potential exposure to class actions by using arbitration agreements that include class action waivers.

The Iskanian court also rejected the employee’s argument that class action waivers are invalid under the National Labor Relations Act.  Only one of the seven California Supreme Court justices accepted that argument.

PAGA lives to fight another day. The plaintiff in Iskanian not only pursued a class action to prosecute allegations of Labor Code violations, but also asserted a representative action under the Private Attorneys General Act of 2004. Another important question presented in Iskanian was whether the arbitration agreement had effectively waived the employee’s right to bring a representative PAGA action.  Here, the California Supreme Court sided with the employee, holding that the PAGA claim is beyond the scope of the FAA, which addresses only private disputes.  The PAGA claim, by contrast, is brought in the name of the State of California, and thus is not a private claim.

California’s high court has notoriously been a holdout against the enforcement of mandatory arbitration agreements, notwithstanding frequent prodding by the U.S. Supreme Court.  With the Iskanian decision, it is likely that other states will reach similar conclusions.

Seyfarth Shaw LLP will be bringing you a One Minute Memo, with in-depth analysis of the decision, shortly.  Stay tuned.