Does Your Employee Alternative Dispute Agreement Cross the Line?

Last year employers struck a victory in the California Supreme Court’s ruling in Iskanian v. CLS Transportation. The court ruled in Iskanian that class action waivers in employment agreements are enforceable. In the aftermath, many employers implemented arbitration agreements with class action waivers and were hopeful that the Iskanian ruling would curb abusive class action claims.

Unfortunately, the California courts struck a blow to employers in the case of Sakkab v. Luxottica Retail. In that case, the court ruled that, while class action waivers are enforceable, PAGA waivers are not. PAGA claims allow employees to bring representative actions (similar to class actions) against employers for certain Labor Code violations. While the plaintiff can only seek penalties, those penalties alone can be very costly. Another benefit of PAGA lawsuits is that the employee does not have to certify the class like in traditional class actions.

The California legislature recently passed a bill amending PAGA that the governor already signed. This new bill expands employers’ rights to cure PAGA violations before an employee can bring a PAGA claim by providing a fully itemized wage statement to each employee.

The bottom line is employers with arbitration agreements and class action waivers are likely to see a decrease in class action litigation, but an increased risk of PAGA claims.

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