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.