Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 185 XIX. Class Action Waivers and Arbitration A. Class Action Waivers and Arbitration Generally Employers have long attempted to protect themselves from potential class actions by including provisions in mandatory arbitration agreements that the employee must individually arbitrate any claims and that the arbitrator cannot certify a class or otherwise allow employees covered by the arbitration agreements to pursue their claims on anything other than an individual basis.904 Federal courts outside California have generally enforced such provisions, but California courts were hostile to them.905 In 2014, following years of uncertainty among California courts as to the enforceability of class waivers in employment arbitration agreements, the California Supreme Court ruled in Iskanian v. CLS Transportation Los Angeles, LLC906 that an employee’s right to initiate a class action lawsuit may be waived in an arbitration agreement, because a rule invalidating such waivers would interfere with the key purposes of arbitration under the Federal Arbitration Act (“FAA”).907 904 There is no universal rule as to whether courts or arbitrators should decide the availability of class arbitration. Sandquist v. Lebo Automotive, 1 Cal. 5th 233 (2016). Who decides whether an agreement authorizes class arbitration is subject to the interpretation of state contract law. Id. Ambiguities are resolved in favor of arbitration and against the drafter. Id. The narrower gateway question of arbitrability is presumed to be with the court. Id.; Nguyen v. Applied Medical Resources, 4 Cal. App. 5th 232 (2016) (reversing the trial court’s order striking the class allegations from the complaint and holding that the arbitrator should decide whether the arbitration agreement contemplates classwide arbitration). The court will also decide any challenge to the enforceability of a delegation clause (i.e., a clause in an arbitration agreement delegating certain rights to an arbitrator), provided that the challenge is to the enforceability of the delegation clause alone, and not to the enforceability of the arbitration agreement as a whole. Malone v. Superior Court, 226 Cal. App. 4th 1551, 1559-60 (2014). However, the Ninth Circuit later held that the gateway question of arbitrability is designated for the arbitrator, not the court, opening a split between the state and federal courts in California. O’Connor v. Uber Techs., Inc., 904 F.3d 1087, 1095 (9th Cir. 2018). Additionally, if employers wish to enforce arbitration agreements, they should seek to compel arbitration in a timely manner or risk a waiver. Garcia v. Haralambos Beverage Co., 59 Cal. App. 5th 534 (2021) (employer waived right to arbitration by litigating case for two years prior to moving to compel arbitration); Fleming Dist. Co. v. Younan, 49 Cal. App. 5th 73 (2020) (employer waived right to compel arbitration by waiting until after a Labor Commissioner hearing and award to file a motion seeking to compel arbitration of the claim); Martin v, Yasuda, 829 F.3d 1118 (9th Cir. 2016) (defendant employer waived its right to compel arbitration after engaging in discovery and waiting 17 months after the lawsuit was filed to seek to compel arbitration); but see Conde v. Open Door Marketing, LLC, 2017 WL 5172271 (N.D. Cal. Nov. 8, 2017) (finding that defendant did not waive its right to compel arbitration, even after engaging in two years of litigation). 905 Compare Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir. 2003) (class action waiver enforceable in action filed under federal Truth-in-Lending Act); Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 638-39 (4th Cir. 2002) (same); Burden v. Check Into Cash of Kentucky, LLC, 267 F.3d 483, 492 (6th Cir. 2001) (same); Randolph v. Green Tree Fin. Corp.-Alabama, 244 F.3d 814, 819 (11th Cir. 2001) (same); Johnson v. W. Suburban Bank, 225 F.3d 366, 370-78 (3d Cir. 2000) (same) with Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) (class action waiver in consumer contract held to be unconscionable) and Gentry v. Superior Court, 42 Cal. 4th 443 (2007) (holding class action waivers in employment contracts to generally be unenforceable). 906 59 Cal. 4th 348 (2014). 907 Id. at 359-60.
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