Iskanian v. CLS Transportation Los Angeles, LLC: California Court Applies Concepcion To Uphold Class Action Waiver In Employee Arbitration Agreement


by Sayema Hameed

In the ever changing legal landscape of employee arbitration agreements, there has been a lot of tension between federal law and California law concerning the enforcement of such agreements.

California case law previously prohibited class action waivers in arbitration agreements when included in consumer contracts of adhesion (known as the “Discover Bank Rule” from Discover Bank v. Superior Court (Boehr) (2005) 36 Cal. 4th 148, 153). Then in April 2011, the United States Supreme Court decided AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___ [131 S.Ct. 1740] (“Concepcion“), holding that the Federal Arbitration Act preempts the Discover Bank Rule and upholding the enforceability of class action waivers in arbitration agreements.

But even after Concepcion, the question remained whether another California Supreme Court case, Gentry v. Superior Court (2007) 42 Cal. 4th 443 (“Gentry“), survived Concepcion. Gentry specifically concerned class action waivers of unwaivable statutory rights (Labor Code claims including overtime) in employee arbitration agreements. Gentry held that a class action waiver in an employee arbitration agreement should not be enforced if “class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.”  Because the U.S. Supreme Court in Concepcion did not specifically address Gentry , there was a question whether Gentry still applied to the analysis of class action waivers in employee arbitration agreements in California.

Now the California Court of Appeal has answered the question as follows: “Now, we find that the Concepcion decision conclusively invalidates the Gentry test.”  In a new decision, Iskanian v. CLS Transportation Los Angeles, LLC (Second District, Div. Two, Case No. B235158; filed 6/4/12), the Court of Appeal has found that Concepcion invalidates Gentry and that a class action waiver in an employee arbitration agreement is enforceable under the Federal Arbitration Act.