Executive Summary: On January 20, 2015, the U.S. Supreme Court denied review of CLS Transportation Los Angeles, LLC v. Iskanian ("Iskanian"), a case which would have determined whether employees in California could continue to bring representative claims, despite the existence of arbitration agreements with mandatory class/representative action waivers. Companies operating in California may now need to rethink their use of arbitration agreements in light of the U.S. Supreme Court's ruling.
On January 20, 2015, the U.S. Supreme Court, without any comment, denied defendant CLS Transportation Los Angeles' Petition for Writ of Certiorari in CLS Transportation Los Angeles, LLC v. Iskanian. The decision leaves intact a California Supreme Court ruling that permits an employee to sue his or her employer over California Labor Code violations on behalf of him/herself and other current/former employees, even though the employee signed an arbitration agreement containing a class/representative action waiver. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014).
The case originally was filed in 2006 as a putative California wage and hour class action by a former limo driver, asserting both putative class allegations and a claim brought under the California Private Attorneys' General Act ("PAGA"). PAGA claims are unique to California and permit private litigants to bring workplace violations against their employers on a representative basis.
The defendant, a limousine company, ultimately responded to the lawsuit by seeking dismissal of the plaintiff's class/representative allegations, contending that the plaintiff had signed an arbitration agreement expressly waiving his ability to bring claims on a class or representative basis. The case went up to the California Supreme Court, who, last year, decided that while arbitration agreements with mandatory class waivers are generally enforceable, the same could not be said for representative claims under PAGA. CLS Transportation subsequently sought the U.S. Supreme Court's intervention.
Commentators had expected the High Court to take a closer look at the Iskanian decision given some federal district courts' subsequent rejection of the California Supreme Court's ruling. But in light of the High Court's order declining review, companies may now need to rethink their use of arbitration agreements in California. In addition to permitting employees to bring their claims on a representative basis, the California Supreme Court previously held that PAGA claims are not subject to class certification requirements. Arias v. Superior Court, 46 Cal. 4th 969 (2009).
We advise clients to contact legal counsel and have their arbitration agreements and practices reviewed in light of the High Court's decision.
