92 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com vindication of the employees’ unwaivable statutory rights and would pose a serious obstacle to the enforcement of the state’s overtime laws. Accordingly, such class arbitration waivers should not be enforced if a trial court determines, based on the factors discussed below, that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.”101 In 2014, the California Supreme Court finally acknowledged that, under U.S. Supreme Court precedent,102 class waivers in arbitration agreements are enforceable, notwithstanding state public policy, because of the preemptive strength of the Federal Arbitration Act.103 In 2018, the U.S. Supreme Court reaffirmed that class waivers are enforceable under the FAA and rejected an argument that they unlawfully interfere with employee rights to engage in concerted activity for mutual aid or protection under the National Labor Relations Act.104 And in 2019 the U.S. Supreme Court held that ambiguity, like silence, is an insufficient basis to conclude that parties have agreed to a class arbitration that would sacrifice the principal advantages of individual arbitration contemplated by the FAA.105 California’s preference for arbitrators to decide whether class arbitration is authorized. A threshold issue for arbitration agreements is who decides whether class arbitration is permitted—the court or the arbitrator? Federal courts generally presume that this gateway question is for the court to decide, while California presumes the question is for the arbitrator (though in either case the contracting parties can expressly dictate who will decide). A factor favoring the federal allocation of decisional authority to the court is that an arbitrator who would be empowered to decide the question of class arbitration would face a conflict of interest, in that the arbitrator would have strong financial incentives to multiply arbitral fees by approving class arbitration. The California Supreme Court deviated from the federal norm in Sandquist v. Lebo Automotive,106 a 2016 decision considering an arbitration agreement that did not expressly address whether class arbitration was authorized. The agreement simply stated that it covered any “claim, dispute, or controversy.” The Supreme Court held that the question of “who decides” whether class arbitration is available—the court or the arbitrator—should be answered by interpreting the agreement under state contract law,107 and that where the agreement does not expressly permit or prohibit class arbitration and states the arbitrator will resolve “all disputes,” then the question of class arbitrability is for the arbitrator.108 California’s invalidation of representative PAGA waivers in arbitration agreements. While California has yielded to federal authority with respect to enforcing class waivers in arbitration, the same has not been true as to waivers of the right to bring PAGA representative actions. For some time, California appellate courts disagreed whether to enforce arbitration agreements by which the parties waive the right to participate in representative actions, such as PAGA actions.109 The California Supreme Court finally addressed that issue in 2014, in Iskanian v. CLS Transportation Los Angeles, LLC. Iskanian acknowledged that the FAA preempts California’s policy against class-action waivers in arbitration agreements,110 but also held, against the weight of federal authority, that representative actions are not subject to mandatory arbitration.111 The Court of Appeal then expanded on Iskanian to conclude that predispute waivers of the judicial forum in a PAGA claim are unenforceable, and that the predispute/postdispute boundary is not crossed until the pertinent employee is authorized to commence a PAGA action as an agent of the state: “Only after employees have satisfied the statutory requirements for commencing a PAGA action are they in a position ‘to determine what trade-offs between arbitral efficiency and formal procedural protections best safeguard their statutory rights.’”112 Employers sought to revisit PAGA’s immunity from arbitration agreements after a 2018 U.S. Supreme Court ruling that arbitration agreements requiring individual arbitration are enforceable under the FAA, regardless of employee
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