Litigating California Wage & Hour and Labor Code Class Actions

While California courts have essentially negated any employer efforts to restrict class actions, the
United States Supreme Court has developed other ideas. In a 2010 decision, Stolt-Nielsen S.A. v.
AnimalFeeds International Corp., 508 the Court held that imposing class arbitration on parties that did
not specifically agree to it would be inconsistent with the Federal Arbitration Act (“FAA”). 509
Employers have attempted to utilize this decision in the trial courts to compel class representative
plaintiffs who had entered into arbitration agreements with class action waivers to arbitrate their
cases as individuals. Thus far, these attempts have sometimes been successful and sometimes
unsuccessful. Until there is guidance on this issue at an appellate court level, it remains unclear as
to what effect Stolt-Nielsen S.A. will have on California law regarding class action waivers.
Another potentially even more favorable class action decision for employers came in 2011 in AT&T
Mobility LLC v. Concepcion, where the Supreme Court held that the FAA preempted California’s
Discover Bank rule in a consumer class action case. 510 This holding, if extended to employment
cases, could effectively overturn Gentry and permit employers to require arbitration of employment
claims while ensuring that class arbitration does not proceed. Many employers are now exploring
the implementation of arbitration agreements with an eye towards limiting or eliminating class
actions of various sorts.
For example, in Quevedo v. Macy’s Inc., 511 the court compelled arbitration of plaintiff’s individual
PAGA claims because the arbitration agreement properly encompassed those “employment-related
legal disputes.” The arbitration agreement permissibly precluded the plaintiff from “representing,
and seeking relief, on behalf of a group.” The fact that the plaintiff’s PAGA claim was not arbitrable
on behalf of a group did not mean it could proceed in court because there was “no authority
suggesting that [plaintiff could] pursue PAGA claims on behalf of others without also pursuing them
himself.” Relying on Concepcion, the court held that California case law requiring arbitration
agreements to allow for representative PAGA claims on behalf of other employees would be
inconsistent with the FAA.
While the full impact of Concepcion is yet to be determined, the California Court of Appeal for the
Second District has held that PAGA claims are not preempted by the FAA. In Brown v. Ralphs
Grocery Co., the court reasoned that PAGA claims inherently different from private causes of action
because, in a PAGA claim, “the aggrieved employee acts as the proxy or agent of the state labor
508
509
510
511
559 U.S. __, 130 S. Ct. 1758, 2010 WL 1655826 (U.S. April 27, 2010).
Id. at *13.
AT&T Mobility LLC v. Concepcion, __U.S. _, 131 S. Ct. 1740 (April 27, 2011).; but see Sanchez v. Valencia Holding
Company, LLC., 201 Cal. App. 4th 74, 89 (2011) (holding that “Concepcion is inapplicable where . . [the court is] not
addressing the enforceability of a class action waiver or a judicially imposed procedure that is inconsistent with the
arbitration provision and the purposes of the Federal Arbitration Act,” and therefore courts may still invalidate
arbitratrion agreements by applying “unconscionability principles [that] govern all contracts, are not unique to arbitration
agreements, and do not disfavor arbitration”).
Quevedo v. Macy’s Inc., 798 F. Supp. 2d 1122, 1141-42 (C.D. Cal. 2011).
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 115