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Iskanian v. CLS Transportation Los Angeles, LLC

Supreme Court of California

June 23, 2014, Filed

S204032

Opinion

 [***293]  [**133]   LIU, J.—In this case, we again address whether the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) preempts a state law rule that restricts enforcement of terms in arbitration agreements. Here, an employee seeks to bring a class action lawsuit on behalf of himself and similarly situated employees for his employer's alleged failure to compensate its employees [****4]  for, among other things, overtime and meal and rest periods. The employee had entered into an arbitration agreement that waived the right to class proceedings. The question [*360]  is whether a state's refusal to enforce such a waiver on grounds of public policy or unconscionability is preempted by the FAA. We conclude that it is and that our holding to the contrary in Gentry v. Superior Court (2007) 42 Cal.4th 443 [64 Cal. Rptr. 3d 773, 165 P.3d 556] (Gentry) has been abrogated by recent United States Supreme Court precedent. We further reject the arguments that the class action waiver at issue here is unlawful under the National Labor [***294]  Relations Act (29 U.S.C. § 151 et seq.) and that the employer in this case waived its right to arbitrate by withdrawing its motion to compel arbitration after Gentry.

The employee also sought to bring a representative action under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). This statute authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state. As explained below, we conclude that an arbitration agreement requiring an employee as a condition of employment [****5]  to give up the right to bring representative PAGA actions in any forum is contrary to public policy. In addition, we conclude that the FAA's goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state's behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.

Finally, we hold that the PAGA does not violate the principle of separation of powers under the California Constitution.

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59 Cal. 4th 348 *; 327 P.3d 129 **; 173 Cal. Rptr. 3d 289 ***; 2014 Cal. LEXIS 4318 ****; 22 Wage & Hour Cas. 2d (BNA) 1511; 199 L.R.R.M. 3772; 164 Lab. Cas. (CCH) P61,492; 2014 WL 2808963

ARSHAVIR ISKANIAN, Plaintiff and Appellant, v. CLS TRANSPORTATION LOS ANGELES, LLC, Defendant and Respondent.

Subsequent History: Reported at Iskanian v. CLS Transportation Los Angeles LLC, 2014 Cal. LEXIS 6886 (Cal., June 23, 2014)

US Supreme Court certiorari denied by CLS Transp. L.A., LLC v. Iskanian, 135 S. Ct. 1155, 190 L. Ed. 2d 911, 2015 U.S. LEXIS 735 (U.S., Jan. 20, 2015)

On remand at, Decision reached on appeal by, Remanded by Iskanian v. CLS Transp. L.A., LLC, 2015 Cal. App. Unpub. LEXIS 1095 (Cal. App. 2d Dist., Feb. 19, 2015)

Prior History:  [****1] Superior Court of Los Angeles County, No. BC356521, Robert L. Hess, Judge. Court of Appeal, Second Appellate District, Division Two, No. B235158.

Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal. App. 4th 949, 142 Cal. Rptr. 3d 372, 2012 Cal. App. LEXIS 650 (Cal. App. 2d Dist., June 4, 2012)

CORE TERMS

arbitration, employees, arbitration agreement, class action, violations, waivers, civil penalty, collective action, invalid, disputes, parties, rights, representative action, contracts, preempted, courts, high court, public policy, qui tam, waived, state law, Wagner Act, proceedings, protections, wages, interfere, vindicate, terms, compel arbitration, unconscionability

Business & Corporate Compliance, Arbitration, Federal Arbitration Act, Arbitration Agreements, Constitutional Law, Supremacy Clause, Federal Preemption, Civil Procedure, Special Proceedings, Class Actions, General Overview, Labor & Employment Law, Wage & Hour Laws, Remedies, Class Actions, Collective Bargaining & Labor Relations, Right to Organize, Unfair Labor Practices, Employer Violations, Organizing & Voting Interference, Alternative Dispute Resolution, Waiver, Evidence, Burdens of Proof, Appeals, Standards of Review, Questions of Fact & Law, Substantial Evidence, Sufficiency of Evidence, Damages, Private Suits, Judgments, Preclusion of Judgments, Governments, State & Territorial Governments, Claims By & Against, Contracts Law, Contract Conditions & Provisions, Exculpatory Clauses, Contracts Law, Defenses, Public Policy Violations, Waivers, Legislation, Statutory Remedies & Rights, Separation of Powers