Iskanian v. CLS Transportation Los Angeles, LLC

Case Updates

The Court held that the Federal Arbitration Agreement (“FAA”) does not preempt a state law that prohibits waiver of Private Attorney General Act (“PAGA”) representative actions in an employment contract, therefore PAGA does not violate the principle of separation of powers under the California Constitution.

In its brief, NCLC urged the California Supreme Court to affirm the judgment of the Court of Appeals, which held that the Federal Arbitration Agreement (“FAA”) requires the plaintiff-employee to resolve his disputes through individual arbitration in accordance with the terms of his agreement. NCLC argued that the plaintiff’s claims fail for four reasons. First, after the Supreme Court's decision in AT&T Mobility v. Concepcion, the California Supreme Court's prior decision in Gentry v. Superior Court cannot stand. The Gentry decision authorized a court to refuse to enforce an arbitration agreement whenever the court determined, as a matter of state public policy, that class procedures - rather than individual arbitration-are a more desirable means of resolving an employment dispute. NCLC argued that the Gentry holding flatly violates the Federal Arbitration Act in light of Concepcion’sdetermination that enforcement of an agreement to arbitrate cannot be conditioned on the availability of class procedures no matter how desirable they might be for unrelated reasons.

Second, NCLC pointed out that the FAA likewise forecloses the plaintiff’s contention that he is entitled to proceed in court with representative claims under PAGA because his arbitration agreement permits him to bring only individual claims in arbitration. NCLC argued that the FAA forbids California from placing PAGA’s private cause of action off-limits to arbitration and that the state may not refuse to enforce the plaintiff's arbitration agreement on the ground that the agreement prohibits him from pursuing alleged labor code violations involving other employees.

Third, NCLC argued that the plaintiff is wrong in asserting that the federal National Labor Relations Act ( “NLRA”) as recently interpreted by the NLRB in the D.R. Horton case precludes enforcement of his arbitration agreement. NCLC argued that the NLRA does not contain the clear, “contrary congressional command” needed to override the FAA's mandate to enforce as written agreements to arbitrate on an individual basis.

Fourth, the defendant company did not waive its right to compel the plaintiff to arbitrate his dispute. NCLC pointed out that under long-standing U.S. Supreme Court and California Supreme Court precedent, the plaintiff cannot meet the necessary “heavy burden of proof” a party seeking to establish a waiver must meet.

Andrew Pincus, Archis A. Parasharami, Scott M. Noveck, and Donald M. Falk of Mayer Brown LLP represented the U.S. Chamber as counsel to the National Chamber Litigation Center.