Cal. Sup. Ct. Sets Arguments for Landmark Employee Arbitration Case

By William Peacock, Esq. on March 06, 2014 | Last updated on January 09, 2022

The facts of this case are pretty unremarkable. Guy (Arshavir Iskanian) drives a limo, gets into a dispute with his employer (CLS Transportation). Guy sues.

Except, there was an arbitration clause. The trial court ordered arbitration, pursuant to the employment contract. An appellate panel reversed, with instructions for the trial court to consider Gentry v. Superior Court, a California Supreme Court case that, in limited circumstances, allows parties to escape "unconscionable" arbitration clauses.

The trial court certified a class, but then AT&T Mobility LLC v. Concepcion happened, hitting the reset button, and sending the case back to arbitration. Now, the California Supreme Court, on Thursday, April 3, 2014 at 9:00 a.m., will hear arguments about whether Gentry remains good law after AT&T Mobility.

Gentry v. Superior Court:

Gentry set forth a mushy, mushy test for determining whether a class action waiver clause is enforceable in an employment context:

"[W]hen it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider the factors discussed above: the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members' right to overtime pay through individual arbitration."

AT&T Mobility v. Concepcion: Federal Preempts State

Gentry, interestingly enough, relied on an earlier California Supreme Court decision, Discover Bank v. Superior Court. Care to guess what opinion was wiped out by AT&T?

Yep, Discover. Justice Scalia, writing for the narrow 5-4 majority, held that the Federal Arbitration Act preempts state law, and since the state law at issue, Discover Bank's prohibition on class-wide arbitration waivers that are unconscionable, was invalidating arbitration clauses en masse, it was acting contrary to the FAA's policy in favor of arbitration.

Discover Bank is dead, but what about its progeny, Gentry?

Wildcard: Labor Code Private Attorneys General Act of 2004

Iskanian didn't just sue on his behalf -- he sued on behalf of the entire state. Calfornia's Private Attorneys General Act of 2004 allows employees to sue to enforce California Labor Law on the state's behalf, and if they succeed, they get a cut (25 percent) of any recovery.

Even if the sum of state laws and Supreme Court precedent doom his ordinary claims to arbitration, does the clause and relevant law doom the representative claims as well?

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