92 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com failure to pay entitles the suing employee to withdraw from arbitration and proceed in court and seek sanctions. Motivating this law was a feeling that companies seek to ensnare employees in mandatory arbitration agreements while strategically delaying arbitrations by failing to pay fees and costs. The law now enables class action attorneys to employ their own strategy: when foiled by an arbitration agreement’s class action waiver, they can flood the employer with employee arbitration demands to impose ruinous arbitration fees upon the hapless employer. California’s ultimately unsuccessful efforts to invalidate class waivers in arbitration agreements. The California Supreme Court long clung to the notion that public policy prevents the enforcement of arbitration agreements that waive rights to participate in class actions. This notion that class actions were immune from arbitration agreements was known as the Gentry rule, named after a 2007 California Supreme Court decision that said: “We conclude that at least in some cases, the prohibition of class-wide relief would undermine the 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.”103 In 2014, the California Supreme Court finally acknowledged that, under U.S. Supreme Court precedent,104 class waivers in arbitration agreements are enforceable, notwithstanding state public policy, because of the preemptive strength of the FAA.105 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.106 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.107 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, a 2016 decision considering an arbitration agreement that did not expressly address whether class arbitration was authorized.108 The agreement simply stated that it covered any “claim, dispute, or controversy.”109 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,110 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.111 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
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