Iskanian v. CLS Transportation Los Angeles, LLC

June S204032. 2014.] [No. ISKANIAN, and Appellant, Plaintiff

ARSHAVIR LLC, ANGELES, Defendant LOS CLS TRANSPORTATION Respondent.

Counsel Perez, Kehr; Law, Raul Katherine W. Initiative Legal Group, Capstone Danas, Wu; A. H. Public Citizen and Scott L. Litigation Glenn Ryan Group for Plaintiff and Nelson Appellant. L. Rice for Rural Legal

Julie L. and California Montgomery Cynthia Foundation as Amicus Curiae on behalf of Plaintiff and Assistance Appellant. Berzon, Rubin; McGuinn, Michael & and Cliff Palefsky Altshuler Hillsman for Service International Union and California Palefsky Employees Association as Amici Curiae on behalf of Plaintiff and Lawyers Employment Appellant.

Rosen Law Firm and Glenn Rosen for California Association of Public Insurance as Amicus on behalf Plaintiff and Adjusters Curiae Appellant. Bach; Firm, The Bernheim Law Steven Bernheim and Nazo S. Amy Jay for United as Amicus Curiae on behalf of Plaintiff Semerjian Policyholders and Appellant. Heisler, Medina, Chukwu;

Sanford Janette Felicia Chioma Barbara A. Wipper, Jones; Radowitz; Barnet; Melvin Della and Jennifer Reisch for Timothy ARP, A Advocates and the Fund as Amici Rights Sandquist, Equal Impact Curiae on behalf of Plaintiff and Appellant. Bowen, David M. and Chumaban B. Bowen for Consumer

Arbogast Arbogast of California as Amicus Curiae on behalf of Plaintiff Attorneys Appellant. Faustman, Rothschild, Armstrong, M. Cristina Gallegos, F. Yesenia David Fox Schotz, Meisel, Tantula; Cole, & Leonard and Leo V. Leyva Forman Namal for Defendant Respondent. Jr., Howard, Retail and Mhairi L. Whitton for Litigation S. George

Jones Day, Center, Inc., as Amici Curiae on behalf of and California Retailers Association Defendant Respondent. Foundation as Amicus Curiae on behalf J. La Fetra for Pacific Legal

Deborah Defendant and Respondent. Simmons, Mullin, Karin Dougan Richter & Richard J. Hampton, Sheppard, as Amicus Curiae on and Matthew M. Sonne for Employers Group Vogel of Defendant and Respondent. behalf Sarwal, and Allen C. Peters for Association of

Amar D. Evan P. Schultz Curiae on behalf of Defendant and Respondent. Counsel as Amicus Corporate Lederman, Woerner, Mendelson, Alexa L. Robert Friedman Littler D. Henry Rent-A-Center, Inc., Federation and and Edward Berbarie for National Retail and Curiae on behalf of Defendant Respondent. as Amici Frank; Chamber of Commerce and Fred J. Hiestand for the California Erika C. Curiae on behalf of of California as Amici and the Civil Justice Association Defendant and Respondent. Perrochet, and Felix Shafir for California Querio & John F. Levy,

Horvitz Lisa and Curiae on behalf of Defendant Car Dealers Association as Amicus New Respondent. Parasharami, Brown, Pincus, A. Scott M. Noveck Andrew J. Archis

Mayer the United States of M. Falk for the Chamber of Commerce of Donald America as Amicus Curiae on behalf of Defendant Respondent. Opinion case, Arbitration Act

LIU, we address whether the Federal again this J. In enforce- 1 et a state law rule restricts (FAA; U.S.C. seq.) preempts § Here, bring an seeks to ment of terms in arbitration agreements. employee action on behalf of himself and situated similarly class lawsuit for, other among to its employees his failure alleged compensate employer’s had entered into an meal and The employee overtime and rest things, periods. The to class right question arbitration that waived the agreement proceedings. is whether a state’s refusal to enforce such a waiver on of grounds public the FAA. We conclude that it is unconscionability policy preempted Gentry Court and that our to the Superior holding contrary Cal.4th 443 165 P.3d has been (Gentry) abrogated Cal.Rptr.3d recent United States Court We further reject Supreme precedent. arguments class action waiver issue here is unlawful under the (29 National Labor Relations Act U.S.C. 151 et and that the seq.) employer § in this case waived its to arbitrate its motion right by withdrawing to compel after Gentry. also to sought bring action under the Labor employee representative Code, (PAGA) Code Private General Act of Attorneys (Lab. et This statute authorizes an to an action for civil seq.). employee bring on behalf of the state his or her penalties against for Labor Code employer violations committed against fellow with most employee employees, below, of the of that to the state. As proceeds litigation going we explained conclude that an arbitration an agreement as a condition requiring employee of give employment bring PAGA actions in up representative addition, any forum is In contrary we conclude that the public policy. FAA’s goal arbitration as a promoting means resolution private dispute not does our from preclude Legislature deputizing employees prosecute Therefore, Labor Code violations on the state’s behalf. the FAA does not a state law that preempt waiver of PAGA prohibits actions in representative contract. employment we hold that the Finally, PAGA does not violate the principle separation under the California powers Constitution.

I. Plaintiff Arshavir Iskanian worked as a driver for defendant CLS Los Transportation Angeles, (CLS), LLC from March 2004 to 2005. August 2004, In December Iskanian a signed Information and'Arbitra- “Proprietary tion that Policy/Agreement” and all providing “any claims” out of his arising were to be submitted employment to arbitration binding before a neutral arbitrator. The arbitration agreement provided reasonable discovery, award, award; written and arbitration, review of the judicial costs to unique fee, such as the arbitrator’s would be CLS. The paid by arbitration agreement also contained class and action waiver that said: representative as “[E]xcept law, otherwise under (1) required applicable EMPLOYEE and COMPANY intend and that expressly agree class action and action representative proce- asserted, dures shall not be nor will in arbitration they any to apply, pursuant (2) this Policy/Agreement; EMPLOYEE and COMPANY that each agree will not assert class action or action claims the other in representative against otherwise; and shall (3) each of EMPLOYEE COMPANY or

arbitration own, to claims in not seek individual arbitration will submit their only the other any person.” interests represent CLS, a class action complaint against Iskanian filed August

On overtime, bréales, meal that to and rest pay provide it failed alleging statements, accurate and complete wage business expenses, provide reimburse In its to the CLS timely final in a manner. answer complaint, wages pay to that all of claims subject other defenses were among plaintiff’s asserted arbitration, in the moved to and March arbitration. CLS binding compel trial but CLS’s motion. after the court’s order granted Shortly trial court matter, in Gentry in this we decision decided before Court Appeal’s in arbitration are invalid agreements class action waivers employment that 463-464.) (Gentry, 42 Cal.4th under certain circumstances. a writ of mandate court directing Court of issued Appeal superior Gentry. its in light reconsider ruling remand, arbitration, withdrew its motion to

On CLS voluntarily compel 15, 2008, On litigate September and the case. parties proceeded amended seven causes Iskanian filed a consolidated first complaint, alleging (UCL; and an Bus. action for Labor Code violations unfair law competition Code, et brought Prof. claim. Iskanian his claims & seq.) in damages, class and also seeking individual putative representative under the PAGA civil for Labor seeking penalties representative capacity moved discovery, certify Code violations. After Iskanian conducting 29, 2009, class, and On the trial court CLS motion. October opposed Iskanian’s motion. granted 27, 2011, Mobility Court issued AT&T the United States Supreme

On April Concepcion LLC v. S.Ct. 563 U.S. L.Ed.2d 1740] Bank Discover our decision in (Concepcion). Concepcion invalidated Court Superior 36 Cal.4th 148 113 P.3d Cal.Rptr.3d (Discover Bank), which had class waivers in restricted consumer action after, Soon CLS renewed its motion agreements. May claims, Concepcion dismiss class also arguing arbitration and compel motion, Gentry. things Iskanian other arguing among invalidated opposed and, event, that CLS its Gentry law had waived good was still by withdrawing original compel to seek arbitration motion right CLS, favor the case into arbitration. The trial court ruled in ordering the class with individual arbitration and claims dismissing prejudice. affirmed, Concepcion invalidated The Court of concluding Appeal Labor Board The declined to follow National Relations Gentry. court also adhesive contracts violate that class action waivers in ruling employment claim, National Labor Relations Act. With to the PAGA the court respect understood Iskanian to be that the arguing PAGA does not allow representa- arbitrated, tive claims to be and it concluded that the FAA states precludes from claims from arbitration and that withdrawing PAGA claims must be action, not in a argued individually, to the representative according terms of the arbitration agreement. the court Finally, trial court’s upheld finding that CLS had not waived its arbitration. We compel granted review.

II. We first address the of the class action waiver validity at issue here and the Gentry Concepcion. viability light

In Discover Bank, we held that when a class arbitration waiver “is found in a consumer contract of adhesion in a in which setting between the disputes contracting involve parties predictably small amounts of damages, when it is that the alleged with the party carried superior bargaining has out power a scheme to cheat deliberately large numbers of consumers out of individu small sums of ally then ... money, waiver becomes in practice fraud, of the exemption ‘from party responsibility own or willful [its] Code, to the injury (Civ. of another.’ person property 1668.) Under these circumstances, such are waivers unconscionable under California law and Bank, (Discover should not be enforced.” 162-163.) Cal.4th at pp. in Concepcion invalidated Discover Bank and held The court high “[Requiring availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” (Concepcion, supra, 563 U.S. at _ S.Ct. at p. According to Concepcion, classwide arbitration “sacrifices the 1748].) p. principal advantage arbitration —its informality makes the process —and slower, more costly, more likely generate procedural morass than final (Id. at _ judgment.” 1751].) S.Ct. at p. Class p. arbitration also “greatly increases risks to defendants” and “is suited to the poorly higher stakes of review, class because litigation” of the lack of judicial “thus (Id. _ rendering arbitration unattractive” to defendants. & fn. 8 S.Ct. at 8].) & fn. court concluded that it ‘stands “[b]ecause as an obstacle to the and execution of the accomplishment full purposes [citation], California’s Discover Bank rule is pre objectives of Congress,’ (Id. the FAA.” empted by S.Ct. at p._[131 1753].) Gentry, In we considered a class action waiver and an arbitration agree- Gentry ment in an contract. The employment that the complaint alleged defendant had employer failed to overtime systematically to a pay wages Discover Bank concerned the class of Whereas employees. of the application class Gentry focused on whether the action unconscionability, doctrine of of the unwaivable “undermine the vindication employees’ waiver would (Gentry, supra, 450.) 42 Cal.4th at We p. overtime to statutory rights” pay. be unenforceable in some circum- that class action waiver may concluded a that has denied systematically it is an alleged employer stances: “[W]hen a class action is to a of requested overtime class employees proper pay that a contains class agreement an arbitration notwithstanding waiver, the modest must consider the factors discussed above: the trial court the for retaliation against individual recovery, potential size of the potential class, the that class be ill may of the fact absent members members world to the vindication about and other real obstacles rights, informed their it individual arbitration. If through to overtime rights of class members’ pay factors, concludes, a likely these that a class arbitration is to be based on of the vindicating rights effective means more significantly practical arbitration, and finds that the than individual litigation affected employees class will lead to a less likely comprehensive of the action disallowance to be affected alleged of overtime laws for enforcement violations, it arbitration waiver ensure must invalidate class employer’s can in an arbitration rights ‘vindicate unwaivable these employees [their] ” (Id. 463-464.) at forum.’ Gentry his he Concepcion. contends that survives In briefing, Iskanian as holding Court has interpreted Concepcion “The Missouri argues: Supreme Discover Bank was because ‘it arbitration even class preempted required unnecessary and was for the if class arbitration consumers disadvantaged (Brewer v. Missouri Title Loans (Mo. 2012) a consumer obtain remedy.’ 486, 489, a Concepcion analysis recent Similarly, S.W.3d Concepcion “stood as an concludes that ‘the defense in unconscionability obstacle,” it a rule that because was categorical preemption purposes, The sin of the Discover Bank rule was that it to all consumer cases. applied an did the claimant to show that agreement operated not require Friedman, (Gilles basis.’ & contract on a case-specific exculpatory After Mobility AT&T Aggregate Litigation Concepcion Class: Wake of 623, 651.)” U. L. Rev. Chi. contrast, “Gentry, ‘is not a rule categorical Iskanian also contends: Gentry disclaimed class action waivers.’ against explicitly [Citation.] Bank, Unlike Discover rule held consumer class- .... which categorical ([Gentry, supra, at action bans unconscionable’ ‘generally Cal.4th] 453), Gentry held because of that when is unwaivable only statutory right id. in ‘some banning its class actions would importance,’ ‘public circumstances’ interfere ‘lead to de facto waiver would impermissibly and to enforce the rights with to vindicate unwaivable ability employees’ Iskanian, (Id. 457.)” laws.’ Courts According overtime “[t]he in which Gentry evidentiary showing have Appeal interpreted require 364 Gentry factors, bears the burden on the demonstrating, of based that

plaintiff a class-action would result in a enforcing ban waiver substantive rights.” Gentry's rule contentions, however, to these the fact that Contrary than Discover Bank's rule does more class waiver is stated against narrowly Concepcion. not it from FAA under The in save court preemption high Concepcion made clear that even if a state law rule consumer against class were waivers limited to “class are proceedings necessary to prosecute [that] might through small-dollar claims that otherwise the it legal slip system,” would still be because a states cannot that preempted require procedure with interferes fundamental attributes of arbitration “even if it is desirable for supra, ___ (Concepcion, unrelated reasons.” at at U.S. S.Ct. p. 1753]; see American Co. v. Express Italian Colors Restaurant U.S._,_& fn. 5 L.Ed.2d 417 & fn. S.Ct. 2312] (Italian Colors).) It is Discover incorrect the thus say infirmity Bank was that it did a not that the showing class waiver require case-specific holds that even exculpatory. Concepcion was waiver class is exculpatory if case, in a it is the nonetheless FAA. Under particular preempted by logic the Concepcion, Gentry’s FAA against rule preempts employment class waivers. Gentry

In his briefing and at oral argument, Iskanian further that the argued rule or modified Gentry a class would whereby waiver be invalid if it rule — a de meant facto waiver of and if the rights agreement failed suitable alternative means for provide vindicating employee rights —survives A, Concepcion under our Inc. Sonic-Calabasas v. Moreno reasoning (Sonic II)- 57 Cal.4th 311 P.3d Cal.Rptr.3d But the Gentry rule, not, whether modified or is not to the analogous unconscionabil- Sonic II. set rule forth in ity Gentry noted,

As held of a waiver validity class turns on whether “a class arbitration is to be a likely more effective significantly practical means of vindicating rights of the affected than employees individual arbitration, litigation of the disallowance class action [whether] will lead likely to a less comprehensive enforcement of or employ- [labor laws to be alleged affected employees ment] employer’s (Gentry, supra, words, violations.” 42 Cal.4th In other if indi- vidual arbitration or cannot be litigation designed approximate advan- of a class then But Concepcion tages a class invalid. proceeding, waiver is held that because class interfere with fundamental proceedings attributes arbitration, a class waiver is not invalid even if individual proceeding Concepcion, would be an (See ineffective means to prosecute certain claims. 563 U.S. at S.Ct. at 1753].) p._[131 II is different from a class waiver. Sonic addressed Berman waiver of statutory II explained, a Berman waiver host As Sonic implicates their wage against with claims to benefit designed protections II, 1127-1130.) One of those (Sonic Cal.4th employers. that we had (a Berman hearing hearing) is a administrative special protections A, v. Moreno Cal.4th Inc. (2011) 51 held unwaivable in Sonic-Calabasas II, (Sonic I). In Sonic we overruled 247 P.3d Cal.Rptr.3d a Berman hearing Concepcion, reasoning I that Sonic light “[b]ecause the of such substantially unwaivability be delayed, causes arbitration to matter even if as a of contractual fairness or public policy, desirable hearing, its namely, objective with a attribute of interferes fundamental arbitration — ” ’ ” ‘ and “is achieve results’ proceedings expeditious “to ‘streamlined II, (Sonic 1141.) Under 57 Cal.4th at supra, the FAA.” p. thus preempted by II, Gentry rule of Sonic which to the logic applied mirrors logic above, clear a Berman interferes with fundamental hearing it is that because arbitration, invalid if the unavail- a Berman waiver is not even attributes would with means to of a leave ineffective hearing employees Berman ability their wage against employers. claims pursue II

But Sonic went on to fact that the FAA that explain preempts “[t]he to be Sonic I’s rule arbitration of wage disputes preceded requiring unconscionability mean that a court hearing applying Berman does not Berman the value of benefits provided by not consider analysis may II, (Sonic statutes, Cal.4th go beyond which well hearing itself.” statutes, observed, fee added.) The we for at italics Berman provide p. wage other to assist undertaking, several shifting, mandatory protections at (57 Cal.4th litigation. should the wage dispute claimants proceed than are situated no differently of the Berman 1146.) “Many protections p. counsel, fee assistance of or other attorney shifting, laws concerning state (Id. civil at one or litigation.” to benefit both rights designed parties Code, 1150; see, for (a) fee shifting Lab. subd. [one-way e.g., claims].) of these and overtime The value wage minimum asserting plaintiffs of a does from the that exist in the context they not derive fact protections clear, Instead, as Sonic II made hearing. administrative prearbitration ways” these be realized in may “potentially many value of protections in a “consistent with its fundamental arbitration manner through designed II, 1149; (Sonic see ibid. mie contemplates attributes.” [“Our arbitration, can be to achieve no an administrative hearing, designed, less than informal, .”].) . . and affordable resolution of claims . wage speedy, II thus rule whether Sonic that considers unconscionability established mechanism claimants wage is an effective resolution dispute (a device Berman inherent to regard any advantage procedural without contrast, attributes of arbitration. By that interferes with fundamental hearing) is an effective dispute Gentry role whether individual arbitration considers direct employees comparison to the advantages resolution mechanism for (a of a device action) class procedural interferes with fundamental II, attributes of arbitration. Gentry, unlike Sonic cannot be with squared Concepcion. Gentry's rule

In practice, class waivers if “a prohibiting class arbitration is to be a more effective likely significantly means of practical vindicating of the affected rights than individual or arbitration . . litigation .” (Gentry, 463) 42 Cal.4th at regularly resulted in invalidation of waivers, Loco, class prior Concepcion. Olvera El (See, least Pollo e.g., Inc. (2009) 65]; v. Western Cal.App.4th Cal.Rptr.3d Sanchez Inc. Enterprises, Pizza Cal.App.4th Cal.Rptr.3d Co., 818]; Franco v. Athens Disposal Inc. 171 Cal.App.4th 539]; Murphy v. Check ’N Go 1298-1299 Inc. Cal.Rptr.3d California, of (2007) 156 120]; Jackson Cal.App.4th S.A.W. Cal.Rptr.3d Entertainment Ltd. (N.D.Cal. 2009) 1027-1028.) F.Supp.2d These results are since it is unsurprising that an unlikely individual action could be to designed the inherent approximate that a leverage class proceeding pro vides with employees claims against (See defendant employer. Concepcion, supra, 563 U.S. at contrast, S.Ct. at p._[131 1752].) By Sonic II addressed claims, actions, individual wage not class and there is no reason to think that the value of Berman distinct from a protections Berman itself cannot hearing be achieved by designing arbitration that is process accessible, affordable, and consistent with fundamental attributes of arbitra II, Sonic (See tion. supra, 57 Cal.4th at are potentially many [“There arbitration, ways to structure without the Berman replicating protections, so accessible, that it facilitates affordable resolution of wage We see disputes. no reason to believe that the elements of the specific Berman are statutes to achieve only way this or that goal will be unable employees their pursue claims effectively without initial resort to an administrative as hearing to an opposed forum.”].) arbitral adequate sum, Sonic II

In recognized the FAA does not states prevent through legislative or judicial rules from addressing problems afford ability accessibility of arbitration. But Concepcion held that the FAA does states from prevent mandating promoting procedures incompatible with arbitration. The Gentry rule runs afoul of this latter We thus principle. conclude in Concepcion light that the FAA Gentry rule. preempts

III. Iskanian contends that even if the FAA preempts Gentry, class action waiver in this case is invalid under the National Labor Relations Act (NLRA). Iskanian adopts the National position Labor Relations Board WL Inc. 2012) 357 NLRB No. 184 In re D.R. Horton (Jan.

(Board) in contracts that compel I) (Horton generally prohibits that the NLRA to resolve in class proceedings their right participate to waive employees enforce that of the refused to recently portion The Fifth Circuit claims. wage Horton, Inc. v. NLRB 2013) 737 F.3d 344 (D.R. (5th Cir. NLRB’s opinion. the Fifth Circuit’s II).) the Board’s (Horton consider below position We it. reasons for rejecting

A. Cuda, Horton, I, at D.R. In Horton Michael superintendent employee, Inc., from overtime statutory he had been misclassified exempt claimed (FLSA; Labor Standards Act of 29 U.S.C. under the Fair protections of similarly initiate a nationwide class arbitration et He sought seq.). that the mutual for Horton. Horton asserted working situated superintendents Cuda (MAA) barred arbitration of collective claims. agreement counsel and the Board’s charge, general then filed an unfair labor practice that Horton violated section alleged complaint issued complaint. that said the the MAA 8(a)(1) maintaining of the NLRA by provision “ have individual claims and does not hear ‘may only Employee’s arbitrator action or to as a class or collective to fashion a authority proceeding ” in one arbitration proceeding.’ relief to a or class group award I, *2].) The (Horton 1 WL 36274 supra, p. 357 NLRB No. p. [2012 8(a)(1) (4) NLRA section further that Horton violated alleged complaint as a condition arbitration that agreements employees, by maintaining required “ and claims to all related disputes of ‘to submit employment employment, ” , with access to the . . . thus interfering employee [Board].’ I, (Horton *2].) An law judge 2 WL 36274 at administrative p. p. [2012 that the latter but not the former is an unfair labor practice. agreed concluded that joining together employees On Board appeal, violations is a form of concerted wage to a class to address bring proceeding (29 157); (2) the NLRA U.S.C. an agreement under section activity § in that as a activity an to waive the to right engage compelling employee an unfair labor under section 8 of condition of is employment practice FAA it 158); this rule is not because is (§ NLRA precluded later (9 2) U.S.C. and because the consistent with the FAA’s clause savings § the extent there is a over the earlier enacted FAA to enacted NLRA prevails conflict. NLRA, that with section 7 of the which states

The Board its began analysis form, to or assist self-organization, join, shall have the to right “[e]mployees of their bargain collectively through representatives labor to organizations, activities for the purpose and in other concerted engage choosing, own or other mutual aid or collective bargaining and shall protection, also have to refrain from any or all of such activities to the extent that except such be affected right may agreement in a labor requiring membership as a condition organization as authorized in section employment 158(a)(3) (29 title.” added.) of this U.S.C. italics §

The Board commented: “It is well settled that ‘mutual aid or protection’ includes efforts to terms and employees’ conditions of ‘improve employment or otherwise their lot as improve through channels outside the employees Eastex, NLRB, immediate Inc. v. employee-employer relationship.’ 437 U.S. L.Ed.2d (1978). S.Ct. The Court Supreme stated in Eastex that specifically Section 7 from retalia ‘protects employees tion by their when seek to their employer they improve working conditions resort through administrative and Id. judicial forums.’ at 565-566. The arbitration, same is true of held, resort to The equally Board has long with [¶] uniform judicial that the NLRA approval, protects employees’ ability join together pursue grievances, workplace including through litigation.” I, (Horton 357 NLRB No. *2].) WL 36274 at p. NLRA,

The Board then 8(a)(1) turned to section of the which it says is an unfair with, labor for an practice restrain, “to employer interfere coerce in the exercise of the employees rights guaranteed in” section 7. (29 found, 158(a)(1).) U.S.C. discussion, Board based on the previous “that the MAA I, (Horton restricts expressly protected activity.” NLRB No. *5].) WL 36274 at “That this restriction on the exercise of Section 7 in the rights form of an imposed agreement between and the employee makes no employer difference. From its earliest days, Board, again with uniform judicial has approval, found unlawful individual employer-imposed, agreements to restrict Section 7 purport rights including, notably, agreements will pursue claims — (Ibid.) against their employer only individually.”

The Board buttressed this conclusion by reviewing statute that preceded NLRA, the Norris-LaGuardia Act (29 U.S.C. et 101 which seq.), among § other limited the things of federal courts to power issue injunctions enforcing “yellow contracts dog” prohibiting from labor employees joining unions. I, (Horton 184, supra, 357 NLRB No. 5 WL p. *7].) 36274 at The p. [2012 ” concert,’ “whether types activity, undertaken or in ‘singly that may not “ be limited by orders or restraining include injunctions ‘aiding any person or interested participating in labor any who ... prosecuting, any dispute action or suit in court of the any United States or of State.’ any 29 U.S.C. added).” (Id. 104(d) *7], at (emphasis § WL 36274 at fn. p. [2012 “ omitted.) ‘The law has been long clear that all variations of the venerable

369 & invalid as a matter of law.’ Barrow Utilities contract” are “yellow dog (Id. 4, at Electric, (1992).” fn. 5 at 6 WL 36274 N.L.R.B. 11 p. 308 [2012 *8].) p. no conflict between the NLRA its analysis by finding

The Board concluded (see U.S.C. 2 the FAA’s clause savings the FAA. on Relying enforced “save such as exist grounds are to be agreements upon [arbitration contract”]), the Board for the revocation of any explained at law or in equity from treating of the FAA was to courts prevent that “the purpose than other contracts. The favorably private Supreme less agreements contracts conflict with has made clear that private Court... ‘[w]herever [the] Act, Labor Relations must or ‘they obviously yield of the National functions’ [(1944)] [332,] to a J. I. Case Co. 321 U.S. futility.’ Act would be reduced To find that an arbitration must agreement L.Ed. 64 S.Ct. 576]. [88 it no worse than other contract that any private to the NLRA is to treat yield labor law. The MAA would violate NLRA equally with Federal conflicts arbitration, as a about but merely required employees, if it said nothing claims in court any against agree pursue condition of employment, I, (Horton 357 NLRB supra, on an individual basis” solely Respondent *11]). 36274 at No. WL p. p. [2012 that arbitration not agreements may The Board also invoked principle ” “ the substantive afforded the statute.’ rights ‘forgo

require party I, *11], WL 36724 at (Horton 357 NLRB No. U.S. Lane Corp. Gilmer v. Interstate/Johnson quoting (Gilmer).) The Board clarified that L.Ed.2d 111 S.Ct. “[t]he can effectively case is not whether employees this question presented Act in an under the Fair Labor Standards vindicate their statutory rights Rather, the issue here is whether MAA’s arbitral fomm. [Citation.] class, federal[,] or collective state employ- categorical joint, prohibition the substantive vested rights ment claims in forum violates directly law 357 NLRB (Horton, of the NLRA.” Section 7 *12], omitted.) fn. WL 36274 No. 9p. ruling Concepcion’s Board a tension between its recognized the FAA is to ensure the that the ... “overarching

statements purpose to their terms so as agreements according enforcement of arbitration that the from bilateral to class “switch facilitate streamlined proceedings” informality.” of arbitration —its advantage arbitration sacrifices principal 1748, 1751].) S.Ct. at pp. 563 U.S. (Concepcion, supra, pp._,_[131 view, consideration was countervailing in the “the of this weight But Board’s it here for several in the context of than is [Concepcion] considerably greater waiver in an the claim that a class-action involved [Concepcion] reasons. State of California was of adhesion in the arbitration clause of contract Here, contrast, in between only agreements employers unconscionable. out in their own are at stake. As the Court pointed [Concepcion], employees of adhesion in the retail and services industries cover might such contracts Id. at 1752. The number of average ‘tens of thousands of claimants.’ potential contrast, a in is and most by single employer, employees employed here, like the case at issue a litigation, only class-wide involves employment subset of an A class-wide arbitration is thus specific employer’s employees. and more akin to an individual far less cumbersome arbitration proceeding each of the dimensions considered the Court in along by [Concepcion]— cost, and risk—when the class is so limited in size. informality, speed, Moreover, in 131 S.Ct. 1751-1752. this case covers one holding only contract, that between an its covered employer type employees, contrast to the broad rule the California Court at issue in adopted by Supreme intrusion on the [Concepcion]. Accordingly, any underlying FAA policies I, (Horton is limited.” 357 NLRB No. 11-12 similarly supra, *15], omitted.) WL 36274 at fn. p. said, the Board “even if there a direct conflict between the

“Finally,” were FAA, NLRA and the there are indications that the FAA strong would have to above, under the terms of the Norris-LaGuardia Act. yield As under explained Act, the Norris-LaGuardia that seeks to a agreement ‘lawful private prohibit means aiding any or interested in’ a lawsuit person participating arising [of] unenforceable, (as out defined) labor is dispute broadly to the contrary ‘concerted activities for . . . mutual aid public policy protecting employees’ To the extent that the FAA effect to such an protection.’ requires giving it would conflict with the agreement, Norris-LaGuardia Act. The Act, Norris-LaGuardia years passed FAA, repealed after turn — — acts and in conflict’ the later (Section 15).” with statute parts ‘[a]ll act[s] I, (Horton *16], 357 NLRB No. WL 36274 at fn. p. omitted.)

B. II, In Horton the Fifth Circuit with the Board’s that the disagreed ruling class action waiver in the MAA anwas unfair labor The court practice. “ recognized ‘the of a civil precedent holding filing by action employees . . . activity to file the lawsuit protected by joining together [and] [the in concerted 127 Rest. 331 N.L.R.B. employees] engaged activity.’ Corp., (2000). lawsuit filed in faith good group ‘[A] more achieve favorable terms or conditions of is “concerted employment under Section 7’ of the activity” Brady NLRA. v. Nat’l Football League, II, (8th 2011).” (Horton 644 F.3d Cir. 356.) 737 F.3d at However, reasoned, the Fifth Circuit “The has in our equal importance [FAA] review. under the Caselaw FAA us in a different direction than the points (Id. course taken the Board.” on the Fifth Circuit that the rejected argument

Relying Concepcion, within fell clause of the FAA. A rule that is neutral savings Board’s rule face in a fashion that disfavors arbitration” is not a on its but is “applied “ ’ ” that exists “for the revocation of contract” within the any ground _ clause. 563 U.S. at (Concepcion, supra, meaning savings p. rule, 1747].) The Fifth Circuit concluded that the Board’s like S.Ct. at p. Bank, Rather, not arbitration neutral. by the rule in Discover was substituting arbitration, the rule class for individual would significantly proceedings undermine arbitration’s fundamental attributes for procedural requiring II, (Horton risks defendants. mality complexity, by creating greater - at 737 F.3d at 563 U.S. supra, p. citing Concepcion, supra, pp. 1750-1752].) S.Ct. at pp. The court then whether “the considered FAA’s mandate has been ‘overrid- ” a den command.’ contrary congressional (CompuCredit Corp. U.S._,_[181 669]; Greenwood L.Ed.2d 132 S.Ct. Colors, 2309].) see Italian at at 570 U.S. S.Ct. “If such supra, p.___ p. exists, text,’ a command it ‘will be discoverable in the the statute’s ‘legisla- tive or ‘an “inherent conflict” between history,’ arbitration and the [statute’s] relevant underlying whether purposes.’ inquiry [Citation.] ‘[T]he [remains] . . . Congress “arbitration other resolution” of precluded nonjudicial ” II, Gilmer, (Horton claims.’ at 737 F.3d supra, p. quoting supra, 26, 28.) 500 U.S. at The court found that neither the NLRA’s pp. language nor its showed indication of legislative history class action prohibiting II, (Horton 360-361.) waiver in an arbitration at agreement.

Next, the Fifth Circuit considered whether there is “an inherent conflict” II, (Horton 361.) between the FAA and the NLRA. 737 F.3d at It noted that NLRA itself “favors arbitration” and policy unions to permits waive the claims in favor right litigate statutory employment (Ibid.) of arbitration. The court also noted that “the collec- right proceed cannot tively vindication of under protect statutory rights employees’ the ADEA or FLSA because substantive has right proceed collectively Gilmer, (Ibid., been foreclosed by decisions.” 500 U.S. at prior citing Industries, (5th 2004) 32 & Carter v. Credit Inc. Cir. Countrywide 362 F.3d 294, 298.) “The to collective action also cannot be de- right successfully fended on the that it with ground greater policy provides employees bargain- ‘Mere ... ing is not sufficient reason power. inequality bargaining power to hold that arbitration are never enforceable in the agreements employment Gilmer, context.’ end 500 U.S. 33. The result is that the Board’s decision creates either a that is hollow or one on an premised already-rejected II, (Horton justification.”

Further, the court enacted and reenacted observed that “the NLRA was to the advent in action We 1966 of modem class prior practice. [Citation.] that there is an inherent conflict to the between argument find limited force a have to be of right when the NLRA would protecting FAA and NLRA the (re)enacted.” when the NLRA was that did not exist access to a procedure II, above, (Horton the supra, omitted.) For the reasons 737 F.3d at fn. p. a class action not foreclose enforcement of held that the NLRA does court II, (Horton 363.) at p. in an arbitration agreement. waiver C. Concepcion, that, the Circuit light We with the Fifth agree Concepcion the FAA’s clause. makes savings Board’s rule is not covered by to arbitration if a rule class waivers against applies equally clear that even interferes with fundamental it nonetheless agreements, and nonarbitration reason, and, disfavors arbitration in practice. attributes of arbitration for that - (Concepcion, supra, 1750-1752].) U.S. at S.Ct. at pp. 563 pp. FAA, Thus, the it must be because the if the Board’s rule is not by precluded over the FAA with to the NLRA conflicts with and takes precedence respect arbitration agreements. of class action waivers in enforceability employment neither the NLRA’s text nor its legisla As the Fifth Circuit explained, command such waivers. congressional prohibiting tive contains history II, (Horton supra, 360-361.) 737 F.3d at the FAA and the

We also that there is no inherent conflict between agree Court. It is NLRA as that term is understood the United States Supreme enacted reenacted to the advent in that “the NLRA was significant prior II, (Horton supra, 737 F.3d at of modern class action practice.” p. sure, To be “the task of of 7 ‘is for the Board to defining perform scope § that come before in the first instance as it considers wide of cases variety ” (NLRB Inc. City Systems, Disposal . . .’ 465 U.S. it 1505]), and the activity L.Ed.2d 104 S.Ct. forms concerted the NLRA are not limited to those that existed when necessarily protected in Italian However, enacted in or reenacted in the NLRA was 1947. Colors, court held that federal antitrust laws do not where high preclude agreement, high enforcement of a class action waiver in found it Sherman and Acts make no significant Clayton court “[t]he fact, the advent mention of class actions. In were enacted decades before they Colors, (Italian supra, . U.S. of Federal Rule of Civil Procedure 23 . . .” well, Circuit, 2309].) like the at S.Ct. at Here as Fifth p._[133 “[w]e find limited force to the that there is an inherent conflict between argument have to be the FAA and NLRA when the NLRA would protecting (re)enacted.” to a that did not exist when the NLRA was access procedure II, (Horton omitted.) at fn. Gilmer, in Italian Colors: “In

Furthermore, court stated high waiver in an arbitration agreement we had no class enforcing qualms issue, even the federal statute at though Discrimination in Age Act, collective Employment expressly permitted actions. We said that statu- ‘ “not mean tory did that individual permission conciliation were attempts ’ ” Colors, (Italian intended to be barred.” 570 U.S. at S.Ct. p._[133 Thus, 2311].) court has held that the high authorization of explicit in the class actions Discrimination in Act Age (see U.S.C. Employment 626(b), enforcement, for referencing, 29 U.S.C. 216 purposes § [provid- class actions as a ing employee violations]) for ELSA remedy does not bar enforcement of a class waiver in an arbitration agreement. This holding reinforces our doubt that the NLRA’s of concerted general protection activity, actions, which makes no reference to class be construed may implied bar to a class action waiver.

We do not find the Board’s persuasive its rule attempt distinguish from Discover Bank on the basis that arbitration class actions employment tend to be smaller than consumer class actions thus “far less cumbersome and I, akin more to an individual arbitration (Horton proceeding.” 357 supra, NLRB *15].) No. 12 WL 36274 at in p. p. Nothing Concepcion [2012 waivers, that rule suggests its class action upholding which relied signifi- on the cantly between the incompatibility formality of class proceedings _ of arbitration informality (Concepcion, supra, 563 U.S. at p. 1751]), S.Ct. at on the size of the p. depends class involved. [131 Nor does the limitation of a class action waiver to between disputes employers mitigate conflict between the Board’s rule and the FAA under reasoning Concepcion. “ conclude, We thus in of the FAA’s ‘liberal light federal policy ” arbitration’ favoring (Concepcion, 563 U.S. at supra, S.Ct. at p._[131 “ 1745]), that sections 7 and 8 of the p. NLRA do not ‘a represent contrary ” command’ congressional the FAA’s overriding mandate (CompuCredit Greenwood, Corp. v. supra, 565 U.S. at 669]). S.Ct. at p._ p. This conclusion is consistent with the judgment of all the federal circuit courts and most of the federal district courts that have (See considered the issue. Sutherland (2d 2013) 290, 297, 8; v. Ernst & LLP Young, Cir. 726 F.3d fn. Care, (8th Owen v. Bristol Inc. 2013) 1053-1055; Cir. 702 F.3d USA, Delock v. Securitas Security (E.D.Ark. Services Inc. 2012) 784, 789-790; 883 Bistro, F.Supp.2d Morvant v. P.E Chang’s China Inc. (N.D.Cal. 2012) 844-845; 870 F.Supp.2d Jasso v. Mart Money Express, (N.D.Cal. 2012) 1038, 1048-1049; Inc. but F.Supp.2d see Herrington 16, 2012, Waterstone (W.D.Wis., Mortgage Corp. Mar. ll-cv-779-bbc) No. 2012 WL *5 advances no p. that persuasive argument [defendant the Board the NLRA interpreted incorrectly].)

Our conclusion does not mean that the NLRA no limits on the imposes of arbitration enforceability agreements. while Notably, class upholding Board’s determination II, Circuit affirmed the the Fifth Horton waiver in (4) of the 8(a)(1) and violated section at issue agreement the arbitration would lead employees language it contained insofar as NLRA labor unfair filing practice from were they prohibited believe reasonably II, 363-364.) 737 F.3d at (Horton supra, the Board. with charges case, from the class Moreover, apart agreement present the arbitration to vindicate waiver, activity wage of collective a broad range still permits the one restrictive than here is less out that the agreement CLS claims. points does not prohibit employees arbitration agreement in Horton: The considered arbitration, the arbitrator from does not preclude claims filing joint from and does not prohibit of multiple employees, the claims consolidating does The agreement relief to a of employees. awarding group arbitrator from claims with one to “discuss their of employees not restrict the capacity advice and another, litigation hire a seek lawyer, their resources to pool union, and file similar from other employees, solicit support from support I, NLRB No. (.Horton individual claims.” or coordinated Colors, U.S. at fn. *8]; cf. Italian p._, WL 36274 only clear that its [making holding applies fn. S.Ct. forms of cost to “other barring action waivers and not provisions class arbitration agreement to decide whether an have no occasion sharing”].) We 7. would run afoul of section activity restricts collective broadly that more IV. ground 1281.2 that one Code of Civil Procedure section provides to right compel to arbitration is denying petition compel “[t]he contends that . . . .” Iskanian arbitration has been waived petitioner arbitration. arbitration to by failing diligently pursue CLS waived its to right We disagree. a number of in meanings the term ‘waiver’ has

“As our decisions explain, denotes the volun- generally law. While ‘waiver’ statute case [Citation.] refer to the loss of a right of a known it can also right, tary relinquishment to failure to an act it is required perform, a result of a perform party’s In the to the right. of the intent relinquish regardless party’s [Citations.] context, ‘[tjhe a shorthand term “waiver” has also been used as arbitration been that a contractual to arbitration has right for the conclusion statement (St. (2003) Center v. Medical Agnes lost.’ [Citation.]” PacifiCare of California (St. P.3d Agnes fn. 4 31 Cal.4th Cal.Rptr.3d Center).) Medical demand have a waiver of the to right . . California courts found

“. contexts, from situations in which party in a of variety ranging arbitration with an has taken inconsistent steps to seeking previously compel intent invoke arbitration in instances which the petitioning [citations] has unreasonably delayed undertaking party procedure. [Citations.] decisions likewise hold that the ‘bad faith’ or ‘willful misconduct’ of a party constitute a waiver and thus a refusal may justify arbitration. compel (Davis v. Blue Cross Northern (1979) 25 Cal.3d [Citation.]” California 1060].) 600 P.2d The fact Cal.Rptr. party for arbitration has of a petitioning litigation, short determina- participated merits, (St. tion on the not Medical does itself constitute a waiver. Agnes Center, supra, 1203.) 31 Cal.4th at We have said the following factors are relevant to the waiver inquiry:

“ ‘ “(1) arbitrate; whether the actions are inconsistent with the party’s (2) whether ‘the litigation has been machinery invoked’ and the substantially ‘were well into of a lawsuit’ parties preparation before notified the party arbitrate; (3) intent to opposing party whether a either party requested arbitration enforcement close to the trial date or for a delayed long period (4) before whether a seeking stay; defendant seeking arbitration filed a counterclaim without for a asking of the stay ‘whether proceedings; important intervening [e.g., steps taking advantage judicial discovery not available in procedures had taken whether the place’; arbitration] ’ ” ‘affected, misled, or (St. delay Agnes prejudiced’ opposing party.” Center, Medical 1196.) 31 Cal.4th at arbitration, In of the light in favor of policy “waivers are not to be lightly inferred and the to establish a waiver party seeking bears a burden heavy Center, (St. Agnes Medical 31 Cal.4th at proof.” “Generally, fact, the determination of waiver ais of and the trial question court’s finding, evidence, if sufficient supported by is on the binding court. appellate [Cita- ‘When, however, the facts are one inference undisputed only may tions.] drawn, be the reasonably issue is one of law and the court is not reviewing ” (Id. bound the trial court’s ruling.’ case, In the CLS filed a present initially to timely petition compel arbitration in to Iskanian’s which response included class action complaint, claims. After the trial court the Gentry, granted this court issued petition, waivers, which restricted the of class and the enforceability Court of Appeal remanded the matter the determine to trial court to Gentry whether affected arbitration, the Rather ruling. than further the litigate to CLS petition compel withdrew the to the claim petition proceeded litigate and resist Iskanian’s move to a class. The certify in both the parties engaged discovery, as to merits and on the class certification issue. In October of the trial court Iskanian’s motion to granted the class. In after certify May shortly doubt, Court filed Concepcion, Gentry Supreme which cast into CLS renewed its to arbitration. The trial court petition compel granted petition. with its right inconsistently never acted that it contends has

CLS abandoned and then arbitration to compel initially It petitioned arbitrate. would be futile. that further petition Gentry made clear when only arbitration in the law made a change as soon as again arbitration to compel It moved contends In Iskanian of succeeding. response, had a chance the motion clear for ground as a legitimate recognize futility does not law that California if there were and that even to arbitration right the assertion delaying CLS’s Gentry, even after here because not apply it should such an exception, chance of success. had some arbitration to compel petition for as futility ground recognized court has not explicitly This Becker Fisher v. A.G. (Compare arbitration. compel delaying petition arbitration asserting in Inc. 1986) [delay F.2d Paribas (9th Cir. made such an doctrine” “intertwining excusable when prevailing rights doctrine].) futility But Court rejected until Supreme assertion futile waiver in the general principles arbitration is implicit grounds delaying whether the the waiver party relevant to inquiry have A factor we endorsed. St. (see to arbitrate with the inconsistently has acted asserting Center, was 1196) delay or whether Medical 31 Cal.4th supra, Agnes Cars, Inc. Motor (Lewis v. Fletcher Jones “unreasonable” (Fletcher Jones)). The fact that a Cal.Rptr.3d Cal.App.4th abandoned that arbitration and moved to successfully compel initially party unlikely made the motion highly after a in the law change motion only has not waived its right that finding party in favor weighs succeed arbitrate. to invalidate all class Gentry did not purport out points

Iskanian cases, when a class in those instances only and hour but wage waivers more effective practical to be a likely significantly action or arbitration “is than the affected individual vindicating rights means of case, 463.) In this (Gentry, 42 Cal.4th at arbitration.” litigation however, action waiver at issue ever class neither has disputed party from Gentry. is therefore distinguishable survived This case would not have arbitration had some asserting where the delay party cases unexcused finding under extant individual arbitration chance of succeeding compelling real Jones, (See Fletcher Cal.App.4th law to class waivers. applicable waivers are Bank's holding that consumer class action 448 [Discover waiver did not class the case of small claims damages preclude in prohibited $19,000 in sought damages].) where plaintiff to that he three years attempting contends because spent

Iskanian certification, effort and on dis considerable including expense obtain class the that the in start delay found on the ground waiver should be covery, ... is critical in that him. We have said “prejudice arbitration prejudiced

377 (St. Center, waiver determinations.” Medical 31 Cal.4th at Agnes itself, 1203.) in by But does not merely participating litigation, “[b]ecause waiver, result in . . . courts will not find where the prejudice party opposing that it court only (Ibid.) arbitration shows incurred costs and legal expenses.” the is found where conduct “Prejudice only petitioning has typically party’s undermined this or im substantially important public policy substantially the other side’s to take and ability advantage the benefits efficien paired cies of arbitration. For courts have found where the example, prejudice [][] used the to petitioning judicial discovery processes gain information party about the side’s not other case could have been in gained arbitration [citations]; and delayed where waited until eve of party unduly trial to [citation]; seek or arbitration where the nature of the lengthy delays associ ated with the resulted in petitioning party’s attempts litigate lost evidence (Id. at p. [citation].”

Some courts have St. Agnes Medical Center to interpreted allow consideration of and of time expenditure money determining prejudice where the (2010) unreasonable. In Burton v. Cruise delay 190 Cal.App.4th 613], for 939 court reasoned “a Cal.Rptr.3d example, petitioning [118 conduct out the itself party’s stretching litigation cause process may the other of the prejudice by arbitration depriving party advantages of as an and efficient cost-effective method to ‘expedient, resolve disputes.’ [Citation.] much, all, Arbitration if loses not of its value if undue and time is lost money in the litigation process (Id. a last-minute preceding petition compel.” 948.) Other courts have found that likewise combined unjustified delay, with expenditure substantial of time and money, of the deprived parties benefits of arbitration and was sufficiently prejudicial support finding (See, waiver to arbitrate. American e.g., Hoover v. Income Ins. Co. (2012) Life 206 312]; 1205 v. El Cal.App.4th Cal.Rptr.3d Roberts Cajon [142 Motors, (2011) Inc. 200 350]; Cal.App.4th Cal.Rptr.3d [133 Sales, (2010) v. Coastal Auto Adolph Inc. 184 1451 Cal.App.4th [110 Guess?, 104]; (2000) Inc. v. Court Cal.Rptr.3d Superior Cal.App.4th 201]; Sobremonte v. Cal.Rptr.2d Court Superior 43]; but see Cal.App.4th Groom v. Health Net Cal.Rptr.2d time Cal.App.4th Cal.Rptr.2d [excluding expense from the calculus prejudice].) however, cases, them,

These do not In Iskanian’s each of support position. substantial were caused expense delay by unreasonable unjustified case, conduct of the In seeking arbitration. this was party delay reason able in of the state of the light law at the time and own Iskanian’s opposition here, Where, to arbitration. initiates party promptly and then abandons arbitration it is because resisted party opposing law, foreclosed existing the mere fact that the then parties proceed not conclusion compel does pretrial litigation in various forms engage a later in the law change its to arbitrate when waived right that the has party arbitration. permits

Moreover, used one where “the before us is not petitioning party the case about the side’s information other gain discovery processes the judicial . .” or “where the lengthy been in arbitration . that could not have gained case to litigate attempts of the associated with delays petitioning party’s nature (St. Center, Medical 31 Cal.4th in evidence.” Agnes resulted lost out, CLS without 1204.) No has been shown here. As points such prejudice Iskanian, it while the was in obtained case discovery contradiction by and 77 of documents pertain- consisted of Iskanian’s deposition pages court agreement Because the arbitration itself wage to his individual claim. ing there is no that CLS obtained for “reasonable indication discovery,” provides that it could not have through discovery material information pretrial arbitral through discovery. obtained sum, delay does not demonstrate that CLS’s in

In Iskanian pursuing have in unreasonable resulted pretrial proceedings arbitration was that CLS not waived We conclude has its cognizable prejudice. arbitrate.

V. noted, the waiver not of class As the arbitration agreement requires only but There is no that the contract’s actions actions.” “representative dispute brought term actions” covers actions under “representative representative Code, (Lab. Act Attorneys Labor Code Private General of 2004. code.) all are to We undesignated statutory et references this seq.; subsequent and, not, law decide such are under state if must whether waivers permissible rule whether FAA state law such waivers. prohibiting preempts

A. of the statutes civil provided Before enactment PAGA several of the Code. The Labor could for violations Labor Commissioner penalties money an action to obtain such with the into bring going penalties, a fund the Labor Workforce fund or into created general Development (See for penalties for Agency (Agency) educating employers. §§ [civil related to the and manner which violating timing wages various statutes are to be 225.5 various statutes related paid], penalties violating [civil due]; 1096.) ch. Labor Code violations withholding Stats. Some wages 215, 216, (See were criminal misdemeanors. §§ First, The PAGA addressed two the bill observed problems. sponsors that Labor Code are “many unenforced because are provisions they punish misdemeanors, able as criminal only with no civil penalty other sanction attached. Since district tend to direct their attorneys resources to violent crimes and other Labor Code public priorities, violations result in rarely criminal investigations (Sen. Com. prosecutions.” on Judiciary, Analysis of Sen. Bill No. 2003-2004) 22, 2003, Sess. (Reg. as amended 5.) Apr. The solution was to enact civil for Labor Code penalties violations “signifi cant to deter (Ibid.) violations.” enough For Labor Code violations for which no the PAGA penalty provided, that the provides are penalties generally $100 each aggrieved for the employee per initial violation and pay period $200 2699, for each per period (§ violation. pay subsequent (f)(2).) subd.

The second was that even when problem statutes civil specified penalties, there was a shortage of government resources to pursue enforcement. The legislative history discussed this Evidence problem length. gathered Committee on Assembly Labor and indicated that the Employment Depart- ment of Industrial (DIR) Relations “was failing effectively enforce labor law violations. Estimates of the size California’s ‘underground economy’ operating outside state’s tax and licensing require- —businesses ranged from 60 to 140 billion dollars a year, a tax loss representing ments — Further, to the state of three to six billion dollars annually. U.S. Department of Labor of the study garment industry Los Angeles, which over employs 100,000 workers, 33,000 estimated the existence of over serious ongoing violations wage city’s garment but industry that DIR was employers, fewer than issuing citations wage year for all industries per throughout Moreover, [QI] the state. evidence demonstrates that the resources dedicated to labor law enforcement have not with the kept of the pace growth economy (Assem. California.” Com. on Labor and Employment, Analysis Sen. Bill 2003-2004) 2, 2003, No. 796 Sess. (Reg. as amended 3.) July We summarized the Legislature’s to this in Arias v. response problem Superior Court 46 Cal.4th Cal.Rptr.3d 209 P.3d (Arias): “In September Legislature enacted the Labor Code Private Attorneys General Act of 2004 The Legislature declared [citations]. of labor law adequate financing enforcement was necessary to achieve laws, maximum with state compliance labor that staffing levels for labor law enforcement had declined and agencies were unlikely with the keep pace market, future growth of the labor and that it was therefore in the public interest to allow aggrieved employees, acting private attorneys general, violations, recover civil for Labor Code penalties with the understanding labor law enforcement agencies were to retain over enforce- primacy private (Stats. ment efforts. ch. § a civil may bring an ‘aggrieved employee’ legislation,

“Under this former other current or and on behalf of action personally Code, (Lab. violations. for Labor Code civil recover penalties recovered, the Labor and to goes percent the civil (a).) subd. Of penalties for the the remaining percent Agency, leaving Development Workforce Code, (i).) subd. (Lab. ‘aggrieved employees.’ § an must civil action for statutory penalties, employee a bringing “Before Code, 2699, (a).) That (Lab. subd. Labor Code section 2699.3. § with comply Code notice of the Labor alleged the to written give requires employee statute Labor and Workforce Development the and the violation to both employer and theories the must describe facts supporting and the notice Agency, 2699.3, (Id., notifies the (a).) employee subd. If the agency violation. § , . . . or if the fails investigate agency it does not intend to the that employer against the a civil action may bring within 33 then days, employee to respond (Id., 2699.3, decides to (a)(2)(A).) If the agency the subd. employer. § a to do If the decides not issue days agency it then has 120 so. investigate, citation, date a after the days postmark or does not issue citation within 158 notice, (Id., action. the commence a civil may the employee employee’s 980-981, 2699.3, fn. (a)(2)(B).)” (Arias, 46 Cal.4th subd. § omitted.) Arias, that if the PAGA were not “con the defendants argued

In under the act to be as class brought actions strued as requiring representative actions,” defendant could be to lawsuits subjected by multiple plain then a claim, would be bound aby a common none of whom raising prior tiffs a because were not they parties prior in the defendant’s favor judgment due (Arias, 46 Cal.4th at We this rejected process lawsuit. action on the that “the PAGA ground judgment representative] concern [a but also on government not on the named binding only employee plaintiff (Ibid.) not a to the aggrieved proceeding.” agencies employee party characteristics of a PAGA We reached this conclusion by elucidating legal . . . under the suing action: “An plaintiff representative employee [PAGA] of the state’s labor law enforcement agent agen does so as the or proxy act, In a under the brought plaintiff represents cies. ... lawsuit employee and interest as state labor law enforcement legal right agencies— the same would have been assessed of civil that otherwise namely, recovery penalties .... Agency. and collected the Labor Workforce Development [Citations.] action not a only against prior Because collateral estoppel applies party determined, for whom the was but also those against party in which issue [citations], in an action acted an a agent judgment employee’s as proxy but the state labor law under the act binds not also only employee enforcement agencies. an action under the aggrieved

“Because functions a employee’s [PAGA] itself, an action brought by substitute for government judgment those, all including action binds who nonparty aggrieved would employees, in an be bound action judgment brought by government. The act authorizes action for the representative only purpose seeking statutory Code, (Lab. for Labor Code violations (a), subds. penalties (g)), an action to recover civil ‘is a law enforcement penalties fundamentally action and not to benefit designed protect public private parties’ Land Research Co. 20 Cal.3d (People Cal.Rptr. Pacific 125]). P.2d When a government is authorized to agency bring interest, action on behalf of an individual or in the and a public private action, lacks an the person independent legal right bring a who is person anot but who is the is bound party represented by agency the as by judgment 41, the (Rest.2d were a though person party. Judgments, (l)(d), subd. com. § d, 397.) with to the Accordingly, of civil respect recovery penalties, as well as the are bound nonparty employees government the in by judgment act, an action under the brought therefore defendants’ due process (Arias, concerns are to that extent unfounded.” 46 Cal.4th at The civil recovered on behalf penalties of the state under the PAGA are distinct from the statutory to which be damages entitled employees may in their individual Case law has clarified the capacities. distinction “between for request statutory the Labor Code penalties provided by for employer violations, which wage-and-hour were recoverable directly by employees Code, well before the became of the Labor and a demand part for [PAGA] ‘civil penalties,’ enforceable the previously only by state’s labor law enforce 203, ment An the agencies. former is section which example obligates that fails to due an employer willfully wages who is pay employee discharged the in quits addition to the pay employee, wages, a unpaid penalty equal to the for each employee’s daily wages not 30 that day, exceeding days, the 225.5, are wages of the latter are unpaid. section which Examples [Citation.] assessed, in addition to provides, other be penalty may an employer that unlawfully withholds in violation of certain wages specified provisions the Labor Code is ato civil in an subject enforcement action initiated penalty the Labor by $100 Commissioner in the sum of for the initial per employee violations, $200 violation and per employee or willful subsequent 256, section which authorizes the Labor Commissioner to a civil ‘impose in an amount not 30 penalty exceeding time under days pay waiting [sic] ” the (Caliber terms of Section 203.’ Bodyworks, (2005) Inc. v. Court Superior 365, 31], omitted; fns. see Cal.App.4th Cal.Rptr.3d [36 Productions, v. Kenneth Cole Murphy (2007) Inc. 40 Cal.4th 1114 [56 880, 155 P.3d under Cal.Rptr.3d [distinguishing 226.7 premium pay 284] § from civil the determining limitations].) statute of penalty applicable tam action. therefore a type qui action is A PAGA representative in a tam qui citizen by for enforcement “Traditionally, requirements (2) that of the exacts a part the statute (1) penalty; have been action informer; that, informer be some (3) way, to the be paid penalty & (Sanders v. Gas suit to recover bring penalty.” authorized to Pacific (Sanders).) The (1975) Cal.Rptr. Elec. Co. Cal.App.3d criteria, that a of the except portion these traditional conforms to PAGA the suit but to all employees the citizen bringing not goes only penalty on whose behalf The government entity Code violation. affected the Labor by (See in the suit. In re the real in interest suit is always party files plaintiff 569].) (1997) Cal.Rptr.3d Cal.App.4th Biddle Marriage the use of tam recently, qui enacted relatively the PAGA was Although times, venerable, statutes and several such back to colonial dating actions is Natural (See Vermont Congress. enacted First were Agency of 765, 776-777 rel. 529 U.S. States ex Stevens Resources v. United Act, False Claims 1858].) allowing The Federal L.Ed.2d 120 S.Ct. claims, of false achieved recovery reporting individuals to share ex rel. Marcus v. Hess (See the Civil War. U.S. during originated 379]; 3730.) The 63 S.Ct. 31 U.S.C L.Ed. 317 U.S. 539-540 [87 Act has in federal standing the federal False Claims tam under qui plaintiff Constitution, though even under article III of the United States court fact, “can be reasonably no because statute injury has suffered plaintiff the Government’s damages of effecting assignment regarded partial authorized tam 773.) recently qui California has more (Stevens, claim.” Code, (Gov. treasury. of false claims the state recovery against actions for the 1420, 1, 5237, 1987, 5239.) In (c), added Stats. ch. by subd. § § addition, tam actions under California law. there are earlier of qui examples Sanders, 671 tam (See, [noting provision 53 e.g., Cal.App.3d qui Code, et (Gov. Act of 81000 seq.)].) in Political Reform 1974 § B. an to right first examine whether employee’s With this we background, rights The of certain unwaivability statutory a PAGA action is waivable. bring that are themselves derived from public policy. “derives from two statutes states; First, which have for their ‘All contracts Civil Code section from for his anyone or to directly indirectly, exempt responsibility object, another, fraud, or violation to the or of own or willful injury person property law, of the law.’ willful or are negligent, against policy of whether parties object, directly indirectly, exempt whose ‘Agreements [their] not be enforced.’ may of the law are against public policy from violation (In Cal.Rptr.2d re Fell Marriage Cal.App.4th states, Second, waive the may 522].) ‘Anyone Civil Code section of a law intended for his benefit. advantage solely But a law established for a ” (Armendariz reason cannot be contravened aby public private agreement.’ Services, Health Foundation Inc. Psychcare Cal.4th 100 [99 (Armendariz).) 6 P.3d Cal.Rptr.2d

These statutes the conclusion that an compel employee’s right a PAGA action is unwaivable. bring (a) Section subdivision states: law, other “Notwithstanding any provision this code that provision for a civil to be assessed and collected provides penalty the Labor and code, Workforce ... for a Development Agency violation of this as an may, alternative, be recovered a civil through action an brought by aggrieved on behalf of himself or employee herself and other current or former noted, to the employees pursuant in Section procedures specified 2699.3.” As the PAGA Legislature’s enacting was to purpose augment limited enforcement of the capability Agency by to enforce empowering employees Thus, the Labor Code as of the representatives Agency. agreement by to waive their a PAGA action employees bring serves to disable one of the mechanisms for the Labor Code. primary enforcing Because such an has as its . . . agreement “object, indirectly, from exempt employer] [the law,” own . . . violation of it responsibility is against [its] public policy Code, (Civ. not be enforced. may Such an agreement also violates Civil Code section 3513’s injunction “a law established for a reason cannot be contravened public private (Ibid.) agreement.” reason, PAGA was clearly established for a public and agreements the waiver of requiring PAGA would harm the rights state’s interests in the Labor Code and in enforcing receiving civil proceeds course, used to deter penalties violations. Of are free to choose whether or not to PAGA bring actions when are they aware of Labor Code (See Armendariz, violations. 24 Cal.4th at fn. 8 freely [waivers made after a has arisen are dispute not necessarily to contrary public policy].) But it is to contrary for an public policy to eliminate employment agreement this choice altogether to by requiring waive the to employees right bring PAGA action before arises. any dispute

CLS that argues arbitration agreement at issue here prohibits claims, only representative not individual PAGA claims for Labor Code PAGA, violations an suffered. Iskanian employee contends that the which an authorizes aggrieved to file a claim “on behalf employee of himself or herself and other current or former (§ (a), subd. employees” italics added), does not an to file an permit employee individual claim. (Compare Reyes Inc. Macy’s, v. 1123-1124 Cal.App.4th Quevedo with Macy’s, Cal.Rptr.3d [agreeing Iskanian’s with position] Inc. (C.D.Cal. 2011) 798 F.Supp.2d employee may [an it on behalf bring to action and waive PAGA an individual bring claim is permissible an individual whether or not But other employees].) PAGA’s claims frustrates the PAGA, of representative a prohibition under the it is autho- “[Assuming has observed: Court of Appeal As one objectives. individual the PAGA for penalties under rized, arbitration a single-claimant under the PAGA punish contemplated in the not result penalties will under numerous employees that violate the rights of deter practices employer be able to bring might and other employees That the Labor Code. plaintiff does not arbitrations violations in separate for Labor Code claims individual PAGA, claim has collateral even if an individual of the serve purpose 985-987.) Other (Arias, 46 Cal.4th effects. estoppel (Brown v. claims in individual proceedings.” to assert their would still have 854], 489, 502 Cal.Rptr.3d Grocery Cal.App.4th Co. Ralphs omitted.) fn. here, where, agreement compels an employment

We conclude PAGA, it contrary under the is public claims waiver representative a matter of state law. and unenforceable as policy

C. rule, laudable, above, however a state law Notwithstanding analysis made As Concepcion it FAA. not be enforced if may preempted clear, when it as an obstacle rule bemay a state law preempted “stand[s] 563 U.S. at (Concepcion, of the FAA’s objectives.” the accomplishment _ PAGA 1748].) that the rule against We conclude S.Ct. below, because, as objectives explained not frustrate the FAA’s waivers does of private efficient forum for the resolution to ensure an the FAA aims and the action is a between employer whereas a PAGA dispute disputes, Agency. state in the statute’s finds expression focus on private disputes

The FAA’s a contract evidenc maritime transaction or text: written in any “A provision controversy to settle commerce involving a transaction ing valid, . . . shall be contract or transaction out such arising thereafter enforceable, irrevocable, as exist at law or save such grounds upon added.) (9 U.S.C. italics contract.” for the revocation equity be read to indicate that FAA applies language may the italicized Although Friedman, (see not statutory rights about contractual rights, only disputes (2012) Arbitration Act Limitation the Federal Controversy The Lost of 1005, the FAA 1037-1045), the court has found high 46 U.Rich. L.Rev. agreement to an arbitration claims between parties to statutory applicable 614, (1985) 473 U.S. Chrysler-Plymouth v. Soler (see, Mitsubishi Motors e.g., however, so, 444, 3346]). statutory Even 105 S.Ct. L.Ed.2d [87

385 “a thereafter out of such contract controversy arising or transaction” is phrase most read to mean a about naturally and dispute respective rights of a contractual obligations parties relationship.

The FAA’s focus on is further revealed in private disputes legislative its which shows that the FAA’s history, was the settlement primary object of (See commercial J. on ordinary Sen. Bill No. disputes. Hearings 1005 and H.Res. No. 646 before the Subcommittees of the Committees on the Sess., 15, (1924) 68th 1st Judiciary, Cong., 29 p. FAA drafter [testimony Julius Cohen that the act Henry will make enforceable the merely customs of id. trade associations to arbitrate 7 disputes]; [testimony Charles Bemheimer, Arbitration, Chairman of Com. on N.Y. State Chamber of Commerce, that FAA is designed resolve “ordinary trade dis- everyday merchants].) between There putes” is no indication that the FAA was intended between govern in its law disputes government enforcement capacity Furthermore, and individuals. private although tam citizen qui actions on behalf of the government were well established at the time the FAA was ante, (see enacted 382), there is no mention of such actions in the legislative history no indication that the FAA was concerned with - (Cf. their Concepcion, supra, 563 U.S. at pp. limiting scope. S.Ct. at that class [noting arbitration was not [131 1751-1752] envisioned that enacted Congress FAA].) Consistent with this the United understanding, States Court’s Supreme FAA one jurisprudence discussed exception below —consists entirely —with own involving disputes parties’ not the rights obligations, rights Colors, Italian (See, enforcement public agency. e.g., 570 U.S. at S.Ct. at p._[133 action by merchants for excessive credit 2308] [class card fees Marmet Health Care Center v. laws]; violation of charged antitrust _ Brown _, (2012) 42, 565 1201, U.S. L.Ed.2d 132 S.Ct. [182 action]; [wrongful death Concepcion, supra, 563 1202-1203] U.S. at p._ S.Ct. at p. action suit [131 over damages 1744] [class fraudulent West, Rent-A-Center Inc. v. Jackson practices]; 63, (2010) 561 U.S. 65 403, 2772, L.Ed.2d 130 S.Ct. suit]; [employment [177 discrimination 2775] Stolt-Nielsen S.A. v. AnimalFeeds International Corp. 662, (2010) U.S. 559 605, 667 L.Ed.2d 130 S.Ct. dispute [176 involving price 1758] [antitrust Preston v. Ferrer fixing 346, supracompetitive (2008) pricing]; 552 U.S. 917, L.Ed.2d 128 S.Ct. by attorney [169 to recover fees [action 978] client]; Buckeye Check Cashing, from former Inc. v. Cardegna (2006) 546 U.S. L.Ed.2d 126 S.Ct. action by 1204] [class Green Tree Financial loans]; borrowers lender for against alleged usurious Corp. U.S. L.Ed.2d Bazzle S.Ct. action suit damages by borrowers lender for against [class violations of state Associates, law]; Doctor’s Inc. v. Casarotto 517 U.S. L.Ed.2d 116 S.Ct. and fraud claims related to 1652] [contract 386 Exp. v. Shearson/Am. (1989) Quijas de Rodriguez agreement];

franchise 526, 477, statutory S.Ct. L.Ed.2d 109 1917] [various 478-479 U.S. [104 sour”]; “turned broker over investments investors against of actions by causes 468, Jr. U. U.S. 470-471 Leland (1989) Sciences v. Volt Stanford Info. contract]; 488, and breach of for fraud S.Ct. L.Ed.2d 1248] [action [103 426, 483, L.Ed.2d 107 S.Ct. 484-485 v. Thomas (1987) 482 U.S. Perry [96 contract, conversion, duty and breach of fiduciary for breach of 2520] [suit Inc. v. Express Shearson/American relationship]; from arising employment 107 S.Ct. 222-223 L.Ed.2d U.S. McMahon 2332] [96 causes of statutory clients various alleging firm brokerage by against [suit 473 U.S. at Chrysler-Plymouth, Motors v. Soler Mitsubishi action]; defamation, between automobile [contract, and antitrust dispute 619-620 pp. 1, 4 L.Ed.2d Keating v. (1984) 465 U.S. Corp. Southland companies]; fraud, contract, breach of breach of action suit for S.Ct. 852] [class related to state disclosure requirements and violation of duty, fiduciary Gilmer, 23-24 age 500 U.S. at pp. [employment agreement]; franchise Constr. Mercury Corp. H. Cone suit]; Hospital Moses discrimination S.Ct. dispute].) L.Ed.2d 460 U.S. 927] [contract the enforcement of an the court has considered high The one case which the does not CLS’s conten- government support agreement against arbitration House, In EEOC v. Inc. the FAA a PAGA action. tion that preempts Waffle House), (Waffle L.Ed.2d 122 S.Ct. (2002) 534 U.S. 279 agreement governed by held that an court high employment Commission not Employment Opportunity FAA does prevent Equal of an bound by from an on behalf (EEOC) suing employee employer relief, reinstatement and such as backpay. agreement victim-specific on the fact that the EEOC was not its conclusion court based primarily House (534 288-289.) U.S. at to the arbitration agreement. party Waffle for the individual employee, noted that the EEOC was not proxy further consent, the action without the employee’s that the EEOC could prosecute (Id. control over the litigation. and that the did not exercise employee House seeking involved a suit by government Whereas Waffle of an bound arbitra- relief on behalf employee obtain victim-specific an arbitration involves an bound tion this case agreement, employee to obtain remedies other government suit on behalf of bringing agreement relief, i.e., into the state largely civil penalties paid than victim-specific House that the FAA a rule Nothing suggests preempts treasury. Waffle tarn action on behalf of the state for waiver of this kind of qui prohibiting such remedies. because coverage claim lies outside the FAA’s a PAGA

Simply put, out of their arising an and an employee it is not a between employer dispute state, and the It is a between employer contractual relationship. dispute or the Agency aggrieved its directly through agents which alleges —either his Through the Labor Code. has violated the employer employees—that civil claim, percent to recover penalties, is seeking Iskanian PAGA that “an action to in Arias We emphasized the state’s coffers. will togo which to designed a enforcement action law fundamentally ‘is civil penalties recover a lawsuit to benefit private parties’ “[i]n and not the public protect the same legal [PAGA], the plaintiff represents the employee under brought and that “an agencies”; labor law enforcement interest as state and for functions as a substitute under the action aggrieved employee’s [PAGA] at (Arias, 46 Cal.4th itself.” the brought by government an action the action is on binding in a PAGA fact that 986.) any judgment p. (46 Cal.4th at the real in interest. that the state is party confirms government a PAGA action unless he or not bring true that “a 986.) person may It is p. Chin, J., (cone. (§ (a))” subd. opn. is ‘an aggrieved employee’ she the or the litigant the character of 395) change but that does not at post, p. action, observes, whether PAGA “every Chin correctly As Justice dispute. aggrieved as to one only for Labor Code violations seeking penalties the action —or as to other employees bringing plaintiff employee—the (Id. the well, on behalf of state.” a action is representative course, a free to the forgo option pursuing Of employee agreement for an employment But it is against public policy PAGA action. (Ante, before arises. any dispute of this altogether, employees option deprive the this contravenes 382-384.) The is whether public policy question of the FAA nor in history Supreme in the text or legislative FAA. Nothing intended to that the FAA was of the statute suggests Court’s construction their enforcement capabilities of states to enhance ability public limit under actions. actions tarn Representative enlisting willing employees qui PAGA, the bilateral for do not damages, displace unlike class action suits their over between employers employees arbitration of private disputes Instead, directly each other. they toward obligations rights respective who violate and deterring employers enforce the state’s interest in penalizing PAGA, could have the Legislature labor laws. In crafting California’s of the defendant citizens who were not employees chosen to deputize to limit instead chose Legislature tarn actions. The to prosecute qui employer had been aggrieved by who willing tarn employees qui plaintiffs (Sen. Com. on Judiciary, to avoid abuse.” in order “private plaintiff employer 2003-2004) as amended Bill No. Sess. (Reg. Apr. of Sen. Analysis the FAA’s does not interfere with 7.) This likewise arrangement goal. policy FAA a to circumvent the not state

Our would today permit opinion for the individual A to a suit bring employee by, example, deputizing B, C, D. This of victim-specific pursuit claims of damages of other on behalf agreement parties to an arbitration relief by party action, whatever to a class would be tantamount private arbitration agreement action Under such an designation given by Legislature. Concepcion, Here, could not be maintained in the face of a class waiver. importantly, (Arias, “the of the state agent” PAGA status as litigant’s proxy semantic; it a PAGA 986) Cal.4th at is not reflects merely litigant’s our labor laws on behalf of state law enforce- substantive role enforcing ment Our FAA state law rule agencies. holding specifically applies waiver of an to an action that can barring bring predispute employee’s the be state or its where only brought by representatives, any resulting is on the state and to judgment binding any monetary largely go penalties state coffers. “

Further, the court has that ‘courts should high assume emphasized “the are historic of the States” not “unless that police powers superseded ’ (Arizona was the clear and manifest of United Congress.” v. States purpose __, _ 351, 2492, (2012) 2501]; U.S. L.Ed.2d 132 S.Ct. see [183 (2011) Chamber Commerce United States America Whiting v. 563 U.S. of of of 582, ___ 1031, 1968, L.Ed.2d 131 S.Ct. precedents [179 198] [‘Our “establish that a threshold must be met if a state law is to be high pre-empted (Sonic II, for the a conflicting [Citation.]’].)” with of federal Act.” purposes 57 Cal.4th at There is no that the enactment and question hours, enforcement of laws concerning wages, other terms of employ (See ment is within the state’s historic Ins. police power. Metropolitan Life Co. v. (1985) Massachusetts 471 U.S. L.Ed.2d 105 S.Ct. [85 ‘States broad under their possess authority regulate police powers 2380] [“ the ”]; workers within the employment State.’ Kerr’s relationship protect Service Catering (1962) v. Industrial Relations 57 Cal.2d Department of Moreover, 20].) P.2d how a Cal.Rptr. state government chooses to structure its own law enforcement lies at the heart authority of (See state v. United sovereignty. States 521 U.S. Printz L.Ed.2d 117 S.Ct. is an essential attribute of States’ 2365] [“It retained sovereignty remain they autonomous within independent their of We can discern in the FAA proper sphere authority.”].) no purpose, much less clear manifest to curtail the of states to purpose, ability their enforcement supplement capability by authorizing willing seek civil for Code Labor violations penalties traditionally prosecuted by state. sum,

In the FAA aims to arbitration of claims promote belonging to an arbitration It does not aim to private parties agreement. promote arbitration of claims to a belonging government and that is no less agency, true when such claim is brought by statutorily for the designated proxy as when the claim agency is itself. The fundamental brought by agency character of the claim as a enforcement action is the same in both public instances. We conclude that California’s waiver of public policy prohibiting claims, PAGA whose sole is to vindicate the in Agency’s interest purpose Code, not interfere with the FAA’s of goal Labor does enforcing resolution. arbitration as a forum for private dispute promoting D. of that the PAGA violates the principle separation powers CLS contends was not in Constitution. Iskanian this issue raised says under California review and not before us. answer to the is properly CLS’s petition to the of the PAGA is issue constitutionality directly pertinent Because to state and because the whether a PAGA waiver contrary public policy, issue, decide have had a reasonable to brief this we will opportunity parties Court, (See 8.516(b)(1), (2).) Cal. Rules of rule the merits of this question. Clara County Superior The basis of CLS’s is found Santa argument 697, 235 P.3d (County 50 Cal.4th 35 Cal.Rptr.3d Court ex rel. Clara). There we reconsidered our earlier holding People Santa 24, P.2d (1985) Court Cal.3d 740 705 Clancy Superior Cal.Rptr. v. 39 [218 bar entities from hiring which (Clancy), appeared categorically public a fee nuisances. In the counsel on basis contingent prosecute public private bookstore, a to close an adult this court injunction context of disputed that counsel must be “abso- acting prosecutor reasoned private public that neutral” and must in a “delicate of values” would engage weighing lutely (Id. at if the had a financial interest in prosecution. be upset prosecutor 748-749.) Clara, clarified that “absolute County Clancy’s In Santa we prohibition of to cases a constitu- only involving on contingent-fee arrangements” applies or “the of an business to continued existing tional interest” “liberty Clara, (County and not to all nuisance cases. Santa operation,” public of did in 56.) Clancy, 50 Cal.4th at We as we recognized, p. civil cases” in “ordinary fee was in contingent representation appropriate (County interests were at stake. which own economic government entity’s of Clara, 50; 748.) at see Cal.3d at Whereas the Clancy, supra, Santa p. in was akin to a criminal with criminal Clancy prosecution, possible suit at and severe civil we said the nuisance suit issue public penalties penalties, Clara, abatement of lead fell County in Santa which involved paint, of somewhere in between an civil case and a criminal ordinary prosecution. cases, Clara, held that for such the interest in 55.) Santa We (County of counsel, when al- is neutrality sufficiently protected private prosecutorial to the interest in though having litigation, “subject supervision pecuniary decisions vital discretionary and control of so that “the government attorneys” (Id. . . . .” to an are made neutral attorneys impartial prosecution of our Santa holding County CLS contends that the PAGA runs afoul of claims interested citizens to prosecute Clara by authorizing financially private on the behalf without governmental state’s CLS further contends supervision. Clara dealt with County Santa that because of regulation legal of court, which is the of this the PAGA violates the province profession, (See of of under the California Cal. Constitution. principle separation powers Const., III, 3; Merco Constr. Inc. v. Court art. Engineers, Municipal (1978) § 636].) 21 Cal.3d 731-732 581 P.2d We Cal.Rptr. disagree. of doctrine does not create an absolute or separation powers “[T]he (Lockyer City v. and San Francisco County of rigid division of functions.” Rather, 459].) 33 Cal.4th P.3d Cal.Rptr.3d substantial of the three interrelatedness branches’ actions is apparent “[t]he the constitutional commonplace: judiciary passes upon validity actions, and executive enacts legislative Legislature statutes that govern rules procedures evidentiary and executive applicable judicial and the Governor proceedings, judges in the appoints participates legisla course, tive the veto Such process through lies at power. interrelationship, the heart of the constitutional of ‘checks and theory balances’ (Superior County Court doctrine is intended to serve.” separation powers Mendocino 13 Cal.4th P.2d Cal.Rptr.2d 1046].)

In considering CLS’s we note that challenge, it would not to the only apply actions, PAGA but to all tam (Gov. California’s False Act qui including Claims Code, et which authorizes the of claims on seq.), prosecution behalf of government Code, entities without government (See Gov. supervision. (c).) subd. Santa No court has the rule in Clancy County of or applied actions, Clara to such and our case law contains no indication that enactment of tam statutes is but a qui anything exercise of legitimate The legislative authority. with Legislature charged scarce allocating budget- in ary (see resources Engineers Government v. Professional California Schwarzenegger 50 Cal.4th Cal.Rptr.3d 1186]), 239 P.3d which includes the of resources to the provision state executive branch for Qui law enforcement. prosecution tam actions enhance the state’s to use such scarce ability resources by enlisting willing Indeed, citizens in the task of civil enforcement. the choice often confronting the Legislature is not between a prosecution by financially interested private citizen and a neutral prosecution by but between a prosecutor, citizen private noted, suit and no suit at all. As the lack of government resources to enforce the Labor Code led a to choice to legislative and incentivize deputize to detect and uniquely positioned such violations prosecute the PAGA. through This legislative choice does not conflict with County Santa Clara. of

Our in that case to holding circumstances in which a applies government A as counsel. “fundamen- attorney law firm or outside a private retains entity that is that such an attorney, context neutrality to about worry tal” reason “has the vast of government, employed by power an attorney directly like him; he refrain from abusing power by must available the government (Clancy, supra, Cal.3d evenhandedly.” By act failing contrast, of the tarn action on behalf government who litigant brings qui tarn has litigant only not to such power. qui does have access generally cost if unsuccessful. The significant incur may or her own resources his PAGA, to enforce the Labor Code on employee deputizing plaintiffs of as when city does the same risks abuse of the not Agency, present behalf to do its bidding. hires outside counsel county or Santa Clara Moreover, involves minimal if County our rule of local govern- executive functions state or interference with legislative the attorneys The rule entities requires government supervise ment. simply contrast, a actions. rule By to hire to nuisance pursue, public choose they interfere with a legitimate tarn actions would disallowing significantly qui aimed at the important public exercise of legislative authority accomplishing scarce resources civil prosecutions. of augmenting government purpose Santa Clara do differences, Clancy County Because of these entities government hired attorneys not the context beyond apply in those There is no conflict between the rule cases contractors. independent the PAGA argument and the PAGA. we CLS’s Accordingly, reject under the California Constitution. violates the separation powers principle VI. CLS cannot waiver of Iskanian’s concluded that Having compel claim that the is otherwise enforceable agreement PAGA but representative terms, to its we next how will according proceed. consider parties can be read as arbitration of Although agreement requiring claims, PAGA neither claims but not of representative party individual has all claims in litigate such a bifurcation. Iskanian sought contemplated court, claims barring CLS has to arbitrate individual while sought while above, In of the altogether. light the PAGA claim representative principles can all that it Iskanian must with bilateral proceed neither wants. party get claims, his and CLS must answer damages arbitration on individual gives The arbitration agreement PAGA claims in some forum. representative to assume that the would resolve prefer representative us no basis parties PAGA claim arbitration. through (1) on agree single a number of Will parties

This raises questions: not, (2) is it the other claims? If for the PAGA claim and resolving forum claims, to bifurcate the with individual appropriate claims to arbitration going and the PAGA claim to (3) If such representative litigation? bifurcation occurs, should the arbitration be to Code of stayed Civil Procedure pursuant Investments, (See section 1281.2? Cronus Inc. v. Concierge (2005) Services Cal.4th 107 P.3d Cal.Rptr.3d Arbitration 217] [Cal. Act rather than FAA procedures arbitrations in Cal. apply brought courts].) The have not addressed these and parties do so on remand. questions may also parties may address CLS’s contention that the PAGA claims are time-barred, as well as Iskanian’s that CLS has forfeited response this contention and cannot raise it on appeal.

CONCLUSION Because the Court of held that the entire arbitration Appeal agreement, waiver, enforced, including PAGA should be we reverse judgment remand the cause for consistent proceedings with this opinion. J., J., Kennard, J.,* C.

Cantil-Sakauye, Corrigan, concurred. CHIN, J., that the Concurring. agree rule of Gentry v. Superior Court —I 42 Cal.4th 443 165 P.3d Cal.Rptr.3d (Gentry), which 556] was announced court, a bare four-to-three majority this is inconsistent with and invalid under the decisions of the United States Court Supreme the Federal interpreting (FAA) Arbitration Act (9 U.S.C. 1 et I also seq.). § that the agree class action waiver in this case is not unlawful under the National Labor (29 Relations Act U.S.C. 151 et seq.), § defendant CLS LLC, Los Transportation Angeles, arbitrate, did not waive its that the arbitration agreement is invalid insofar as it purports preclude plaintiff Arshavir Iskanian from bringing forum a action representative under the Labor Code Private General Attorneys Code, Act of (PAGA) (Lab. et and that seq.), this conclusion is not inconsistent with the FAA. However, below, I explained do not endorse all of the majority’s reasoning discussion, its including A, endorsement of dicta in Sonic-Calabasas Inc. v. Moreno 57 Cal.4th 1109 Cal.Rptr.3d P.3d (Sonic II). I therefore concur in the judgment. Gentry’s

I. Both Rule and Sonic II’s Dicta Are Invalid

Under the FAA. above, As noted I agree with the rule majority Gentry’s not stand may under the United States Indeed, Court’s Supreme construction of the FAA. Court, *Retired Associate Supreme Justice of the assigned by pursuant Chief Justice VI, article section 6 of the California Constitution.

393 reason, Gentry, Baxter’s well-reasoned dissent in I Justice very joined that FAA nor California law courts to permits that neither the which explained a device for class actions as beneficial for “elevate a mere judicial affinity Congress laws the both policy expressed the above wage implementing . . that individual to arbitrate . voluntary agreements own Legislature and our 42 Cal.4th at (Gentry, supra, to their terms.” according be enforced should Baxter, (dis. J.).) opn. however, to unconscionability majority do not that the agree, approach I the high in Sonic II “be with may squared” this court described dicta in ante, at my That (Maj. FAA decisions. opn., approach, court’s the FAA as the court high in Sonic II is explained, preempted by dissent (2011) v. 563 U.S. 333 that in AT&T LLC Mobility Concepcion construed act Co. S.Ct. American v. (Concepcion), Express L.Ed.2d 1740] [179 U.S._[186 L.Ed.2d 133 S.Ct. Colors Italian Restaurant II, (Sonic 57 Cal.4th (Italian Colors), and several other decisions. Chin, J.).) (dis. has occurred since we Nothing at opn. 1184-1192 pp. II change my Sonic view. issued

Indeed, in this the invalidity the discussion case further reveals majority’s IT to the under that federal law of Sonic s dicta. According majority, under dicta, agreed whether arbitration which have parties procedure is, but it not on whether it on whether permits recovery, unconscionable turns view, for claimants” a court’s less “effective ... than wage “dispute in “the procedures resolution mechanism” includes protections ante, However, 365-366.) at Berman statutes” (Maj. opn., pp. prescribe. has FAA does not courts to invalidate court established that the high permit based the view that the set forth agreements they arbitration on procedures “ would-be afforded the substantive law to would ‘weaken protections [] (Green Corp.-Ala. Randolph Tree Financial v. complainants.’ [Citation.]” 513].) S.Ct. Consistent (2000) 531 U.S. L.Ed.2d Colors, Italian the court held that an arbitra- recently with this principle, be not based waiver tion invalidated on its agreement may proof action —would make mechanism —the class congressionally approved pursu- Colors, (Italian claim a federal antitrust ing prohibitively expensive. - fortiori, 2310-2312].) at 570 U.S. S.Ct. A pp. pp. invalidated on a agreement subjective arbitration not be based court’s may view that the waiver of Berman agreement’s procedures protections render ... than a wage would arbitration less “effective claimants” resolution mechanism” that includes those procedures protec- “dispute ante, court, 365-366.) to the the FAA According high tions. (Maj. opn., a liberal federal favoring is “a declaration of congressional policy substantive or notwithstanding procedural policies state agreements, Mercury H. Constr. contrary.” (Moses Hospital Corp. Cone 927], added.) Justice To quote U.S. L.Ed.2d 103 S.Ct. italics 394 Gentry, dissent in it does not courts to “elevate a mere permit

Baxter’s the Berman resolution “as a for” mechanism benefi- judicial affinity dispute wage cial device for laws above the policy implementing expressed . . . . . that . individual to arbitrate . . . Congress voluntary agreements be 42 according should enforced to their terms.” Cal.4th at (Gentry, supra, Baxter, (dis. J.).) 477 I do not join majority therefore opn. opinion insofar as it that the suggests unconscionability described in approach Sonic II’s dicta is valid under the FAA.

II. PAGA Waiver Is Unenforceable. PAGA, Under an “aggrieved who employee” i.e., “any person was — someone to have violated the Code employed by” alleged Labor “and against one of the whom or more was alleged violations may bring committed” — action civil against alleged violator recover civil for Labor penalties Code violations both as to herself himself or and as to “other current or 2699, Code, (Lab. former (a), (c).)1 subds. employees.” As we have “ explained, aggrieved PAGA action ‘is employee’s fundamentally law ” enforcement action’ for an action brought by govern- “substitute^] (Arias itself.” (2009) ment Superior Court 46 Cal.4th 986 [95 P.3d Cal.Rptr.3d 923].) The “acts as the employee-plaintiff or proxy agent state law agencies, labor enforcement the same representing legal interest as those agencies” and civil seeking statutory “that penalties Union, otherwise would be sought by” those agencies. Transit (Amalgamated Local (2009) AFL-CIO v. Superior Court 46 Cal.4th 1003 [95 statute, P.3d Cal.Rptr.3d 937].) of the By percent penalties “recovered by under aggrieved employees” PAGA goes Labor and Workforce Agency, only to “the Development percent goes aggrieved (§ action, subd. employees.” (i).) Accordingly, every PAGA whether seeking for Labor Code penalties violations as to one only aggrieved employee the action —or as plaintiff bringing to other employees as —the well, is a action on of the representative behalf state. relevant,

As the arbitration here agreement as other- provides; “[E]xcept law, wise required under applicable EMPLOYEE and COMPANY ex- intend and pressly class action action agree representative procedures asserted, shall not be nor will they any arbitration apply, pursuant to this Policy/Agreement; EMPLOYEE and COMPANY that each agree will not or assert class action action representative claims against other in otherwise-, and (3) each of EMPLOYEE and COMPANY shall own, only submit their individual claims in will arbitration and not seek to Because, represent (Italics added.) interests other any person.” above, actions, all PAGA explained claims are these representative provisions statutory All further unlabeled to the references are Labor Code. To a PAGA action in bringing Iskanian from to preclude purport forum. states, is, extent, for the invalid majority arbitration reasons the provision this ante, 382-384.) at (Maj. pp. under California law. opn., with the that conclusion is not inconsistent with the this majority I agree the FAA FAA, from the majority’s. Although differs my reasoning but to their of arbitration agreements according enforcement generally requires “a terms, an to this for the court has high recognized exception requirement the assertion of certain forbidding in an arbitration agreement provision _ Colors, U.S. at S.Ct. at (Italian rights.” p. statutory (1985) 473 U.S. 2310]; Chrysler-Plymouth Mitsubishi Motors v. Soler see p. the L.Ed.2d 105 S.Ct. as long prospective 637 [87 3346] [“so vindicate its cause of action in the arbitral may statutory litigant effectively forum, to serve both its remedial and deterrent the statute will continue function”].) the that the arbitration here is conclusion Accordingly, agreement it from under asserting statutory right invalid insofar as forbids Iskanian his run afoul of the FAA. the PAGA in forum does not a route in no It first finding takes different majority preemption. that the FAA its terms by only observes correctly applies provisions “ a thereafter out of such controversy arising contracts ‘to settle by ” omitted, ante, 2.) at U.S.C. contract.’ italics (Maj. p. quoting opn., that a PAGA claim “lies” on this the then declares language, majority Based it a between “outside the FAA’s because is not coverage dispute completely out of their contractual and an employee arising relationship.” employer instead, ante, is, 386.) “a between an at It (Maj. merely dispute opn., p. state, or its directly through agents and the which alleges employer —either Agency aggrieved employees the Labor and Workforce Development —that ante, 386-387.) the Labor Code.” at (Maj. the has violated opn., employer First, reasons, I disagree For several I the majority’s analysis. question and an a PAGA claim is not “a between an employer employee dispute ante, 386.) at As (Maj. out of their contractual arising relationship.” opn., above, “an a not a PAGA action unless he or she is may bring noted person i.e., (§ (a)), subd. “who was employed aggrieved employee” person whom” at least one of the “against Labor Code violator by” alleged words, (c)). (§ committed” subd. In other as violations “was alleged statute, ha[ye] been aggrieved by who majority only explains, “employees ante, Thus, PAGA actions. may bring (Maj. opn., employer” extend the contractual may beyond PAGA action although scope and the between the employer relationship plaintiff-employee —because for violations as to other employees recover civil may penalties plaintiff —the arises, out of that fundamentally, relationship. first dispute case, Second, in this we need not novel adopt to find no FAA preemption law that renders the FAA completely inappli- devoid of case theory, support, claims. Under the view that PAGA claims majority’s cable to PAGA “lie[] the FAA’s because are not between coverage” they disputes employ- outside out of their contractual “arising relationship” (maj. opn., ers and FAA, ante, ban 386), the state without constraint may, simply declare to arbitrate such claims arbitration of PAGA claims and agreements view, which the offers unenforceable. I do not subscribe to majority contrast, above, there case law no case law By explained support. court the conclusion that the arbitration high itself—for support—from it here is because to Iskanian agreement purports preclude unenforceable an from a PAGA action in We should limit ourselves to bringing forum. in court rather than high needlessly analysis firmly grounded precedent, adopt a novel that renders the FAA theory completely inapplicable. House, Third, assertion, to the EEOC v. Inc. contrary majority’s Waffle 755,

(2002) L.Ed.2d House), 534 U.S. 279 122 S.Ct. to the (Waffle [151 relevant, extent it is that the actually does FAA “suggest^ preempts” (maj. ante, whether, 386) at the rule. The there majority’s was opn., p. question FAA, under the between an and an agreement to employer employee arbitrate the employment-related disputes precluded Equal Employment Op- (EEOC), Commission which was not “a to” the portunity arbitration party claims,” and had agreement never to arbitrate its from “agreed pursuing House, relief in a enforcement at judicial (Waffle action. victim-specific supra, “no,” 294.) The court said that in the FAA p. explaining nothing “place[s] any House, restriction on a choice aof forum” at nonparty’s judicial (Waffle 289) a to arbitrate claims it has not p. requires “nonparty” agreed (id. 294). arbitrate at Because Iskanian is a to the arbitration p. party case, in this this is agreement holding What is inapposite. apposite Waffle House is the court’s statement that the FAA the “ensures enforceability House, 289.) to arbitrate.” 534 U.S. at private agreements (Waffle p. statement, This which reiterates what the court has said “on numerous simply (Stolt-Nielsen (2010) occasions” S. A. v. AnimalFeeds Int’l U.S. Corp. 605, L.Ed.2d 1758]), 130 S.Ct. casts considerable doubt on the [176 the view that FAA either California or its courts to declare majority’s permits agreements to arbitrate PAGA claims unenforceable. private categorically under other court there the Finally, high is reason to doubt precedent, good that the FAA no limit on “the of states to majority’s suggestion ability places enhance their enforcement public capabilities enlisting willing employees ante, tarn actions.” When the court qui (Maj. opn., high recently held in that the FAA courts from enforce- Concepcion conditioning prohibits ment of arbitration agreements on of classwide arbitration availability even if such “are necessary small-dollar procedures, procedures prosecute claims that otherwise it “. .'. might through legal system,” slip explained: FAA, even if States cannot is inconsistent with it require procedure (Concepcion, supra, is desirable for unrelated reasons.” 563 U.S. at p._ decisions, 1753].) In earlier court high broadly S.Ct. explained the FAA “is a declaration of a liberal federal congressional policy state substantive or agreements, notwithstanding any favoring (Moses to the H. Cone policies Hospital Mercury v. procedural contrary” Constr. added), U.S. at italics which Corp., supra, “withdraws] of the forum for the judicial states resolution claims power require (Southland which the to resolve contracting agreed by arbitration” parties Thus, Keating L.Ed.2d Corp. 852]). 465 U.S. 104 S.Ct. “if to include” certain claims “within the contracting parties agree issues arbitrated, be the FAA ensures that their will be enforced agreement accord to its terms even a rule state law would otherwise exclude such ing if Hutton, (Mastrobuono claims arbitration.'” v. Shearson Lehman Inc. from 1212], 514 U.S. L.Ed.2d 115 S.Ct. omitted & italics words, added.) In other state law outright arbitration of prohibits “[w]hen claim, is analysis straightforward: rule particular type conflicting the FAA.” (Concepcion, supra, 563 U.S. at S.Ct. at displaced p._[131 fact, 1747].) These indicate that binding the FAA in pronouncements may, state, reasons, a limit on the of a ability to “enhance” its place policy enforcement by who have contrac public capabilities authorizing employees to arbitrate their tually agreed PAGA claims to that statutory ignore agree ment and those claims in court as the state’s pursue (Maj. “representatives.” ante, 387-388.) opn.,

However, above, an arbitration explained requiring provision preserve some forum for PAGA actions does not exceed that limit. I bringing therefore concur in the judgment.

Baxter, J., concurred. WERDEGAR, J., and Concurring the court’s conclu- Dissenting. join—I sions as to Arshavir Iskanian’s Labor Code Private General Act of Attorneys Code, claims, (Lab. 2004 2698 et which are not seq.) foreclosed his § (FAA; contract or the Federal Act employment Arbitration U.S.C. 1 9 et I with the seq.). disagree that class action separate holding mandatory and class arbitration waivers Iskanian’s contract are employment lawful. decades made clear Eight ago, that have a Congress in collective and engage action that contractual clauses purporting strip them of those as a condition of are rights What was true employment illegal. then is true I would today. reverse the Court of decision in its Appeal’s entirety.

398

I. “ action, ‘iron- first known as collective contracts prohibiting Employment ” Contract and clads,’ (Ernst, Yellow-dog The century. date to the 19th (The 251, Yellow-dog Lab. Hist. (1989) Liberal Reform, workers to for better agitate collective efforts Contract).) Confronted with by conditioning responded terms and conditions of employment, employers workers in a with fellow together on the not join employment promise (1949) Co. U.S. (Lincoln union. Union v. Northwestern Action, Silverstein, 251]; Property Rights Collective L.Ed. 69 S.Ct. Lab. LJ. (1993) the Labor 11 Hofstra Story Injunction Law The Reform: that these they gave was “so obnoxious to workers 100.) This practice ” Union, (Lincoln the name of contracts.’ agreements ‘yellow dog required 534.) that agreements large part represent superior such “Recognizing virtue of which the theoretical freedom economic of the employer by position agreements to refuse assent was such illusory, of an employee ” state bargaining,’ therefore of collective meaning ‘right emptied to stem the statutes sought enacting legislatures Congress practice, on a contractual not conditioning compulsory promise prohibited employment Greene, (1930) (Frankfurter Injunction to unionize. & Labor unsuccessful; courts, state and then the These efforts were first initially Court, United States struck down the bans as Lochner-era1 Supreme U.S. on of contract. v. Kansas infringement liberty (Coppage 240]; U.S. L.Ed. 35 S.Ct. Adair v. United States 9-14 [59 436, 277, 605]; Frankfurter & L.Ed. 28 S.Ct. 5 Ohio L.Rep. Hist, 146-148; Contract, Greene, 30 Lab. at Yellow-dog at The pp. a clear to 252.) yellow-dog When the Court gave imprimatur Supreme (1917) & Coke Co. v. Mitchell 245 U.S. contracts in Hitchman Coal 229 [62 260, 65], organizing L.Ed. 38 S.Ct. collective injunction against upholding that the contracts granted right efforts on the ground employers property interference, the on collective secure from union use of contractual bans Greene, 148-149; (Frankfurter Yellow-dog & at The action blossomed. pp. Contract, terms, 253-256.) “[a]ny at the use of such Through employer pp. foreclose all effectively to could willing compel acquiescence employee Jr., (Winter, at business.” Labor union efforts directed his organizational The Role Norris- Contemporary and Labor Law: Injunctions Judge-made of 70, 72, (1960) 14.) LaGuardia 70 Yale L.J. fn. 937, U.S. 45 L.Ed. 25 S.Ct. 539]. Lochner v. New York 1930’s, In the tried Congress again to outlaw contractual bans on collective action. A bill drafted then Professor Felix Frankfurter and others2 was and swiftly in both overwhelmingly approved houses and enacted as the The (Bremner, Norris-LaGuardia Act of 1932. Background Norris-La of Guardia Act 174-175.) Historian Section 2 of the act declared as the of the United States public policy to employees’ right engage in collective free from activity, restraint or coercion: employer “Whereas conditions, under economic prevailing with the aid of developed governmen tal for owners of authority in the property organize and other corporate association, forms of ownership individual unorganized worker is com to exercise actual monly helpless of contract and liberty his protect labor, of freedom and to obtain thereby terms and acceptable conditions of wherefore, ... it is necessary that he have full freedom of employment, association, and self-organization, of designation of his own representatives to negotiate the terms and choosing, conditions of his and that employment, restraint, he shall be the interference, or coercion employers free from of of labor, or their agents, in the designation of such or in representatives or other concerted activities the purpose self-organization collective for or bargaining other mutual aid or protection (29 . . . .” U.S.C. italics added.) laborer, alone, Congress recognized of a inability “single standing confronted with such far-reaching, overwhelming concentration of employer or to exert power” “negotiate influence over the of his fixing wages labor,” hours conditions of his corrective to be necessary “[t]he earners to wage organize to act jointly questions affecting labor,” and, wages solution, conditions as the legislative [and the] “specific action” to workers’ “freedom preserve in association to influence the fixing Sess., wages working conditions.” No. 72d (Sen.Rep. Cong., 1st 9p. id., (1932); see 9-14.) generally pp. Arguing act’s passage, Norris, Senator cosponsor, George the measure explained was needed to end in which “the regime man .... must laboring singly present any grievance Norris, (Remarks he has.” of Sen. Debate on Sen. No. 72d 1st Cong., Sess., 75 Rec. Cong. (1932).) end,

To that section 3 of the Norris-LaGuardia Act was “designed outlaw so-called Sess., contract.” yellow-dog No. 72d (H.R.Rep. 1st Cong., accord, (1932); No. Sen.Rep. vice of “[T]he 15— contracts, such which are becoming alarmingly was that widespread,” they rendered collective action and “[i]ndeed, unions effectively that is impossible; their and the undoubtedly purpose, of the purpose organizations of employers 669, the Norris-LaGuardia opposing” 7.) Act. No. at If such (H.R.Rep. p. 2 Greene, 61; Injunction, supra, See Frankfurter & id. at The Labor page 226 and footnote Others, (draft Fischl, Self, bill); and Section 7: Mutualism and Protected pages Protest Activities Under the National Labor Relations Act 789, (1989) 89 Colum. L.Rev. 846-849. 400 association, were of free

contracts, rights workers’ a waiver of requiring so far courts, action would be impossible “collective in the enforcement given of the signing the necessity virtue of concerned the as employee condemned, from with his a man joining which prevents character of contract ‘it been action; long . . . that has and the statement for collective fellows of securing to for organize purpose are entitled that recognized employees relating with employers agreements and grievances promote the redress of statement of would become empty of work’ and conditions to rates of pay (1930) 281 Ry. R. Co. v. Clerks Texas & N. O. (Ibid., quoting historical fact.” 1034, the Norris- 427].) 548, Accordingly, 50 S.Ct. L.Ed. U.S. 570 [74 to the contrary public contracts “to be yellow dog Act declared LaGuardia court of the United unenforceable in States” and of the United policy 103.) (29 U.S.C. States. § later, in the National on these Congress proscriptions

Three years expanded author, Act after its Wagner known as (commonly Relations Act Labor 449, 5, 1935) 49 Stat. (Pub.L. (July No. 74-198 Robert F. Wagner). Sen. 151-169.) The underlying public policy as amended at 29 U.S.C. codified §§ Act: the Norris-LaGuardia “protecting as that motivating the act was the same association, self-organization, full freedom of exercise workers of of their own choosing, purpose of designation representatives or other mutual aid of their the terms and conditions employment negotiating end, Act (29 151.) Wagner granted U.S.C. To ensure or protection.” § alla, . activities for ... in . . concerted engage inter “the right employees, aid or . . . .” or other mutual bargaining protection of collective purpose 7).)3 were forbidden “to (also known as section (29 Employers U.S.C. 157 § restrain, with, the exercise of’ their coerce in interfere employees alla, concerted, (29 158(a)(1).) Inter U.S.C. activity. in collective engage extension of section were a “logical imperative these provisions contract unenforce- Act which makes the yellow-dog the Norris-La Guardia 1935, Act of (Nat. Hearings Labor Relations able in the Federal courts.” Sess., 6288, H.R. No. 74th 1st Cong., House Com. on Labor on before accord, Wagner, remarks of Sen. (1935), 14 of Sen. Wagner; statement p. Sess., 1958, Rec. 7570 (daily 1st Cong., Cong. Debate on Sen. No. 74th Sess., 1935); No. 74th 1st Cong., ed. see May H.R.Rep. of collective action on the 19.)4 part as clear “the legality Recognizing interests,” the their post-Lochner in order to safeguard proper Act, heart, Chief Justice Taft’s it had in the Norris-LaGuardia Congress took to dealing employer,” with an “single helpless was employee that because a admonition with their opportunity equality to deal on give laborers [the] collective action “was essential Tri-City L.Ed. (Amen Council 257 U.S. employer.” Foundries v. Sess., 72], H.R.Rep. Cong., 74th 1st H.R.Rep. No. quoted S.Ct. Sess., Cong., No. 1st 72d major other Congress, for unlike most Wagner’s “intent was the intent Senator Although Wagner single legislator. received product of a legislation, this statute was against Court now constitutional upheld challenge “safe Supreme Congress’s 1, of (Labor (1937) this Board v. Jones & guard” right. Laughlin 301 U.S. 893, 615].) 33-34 L.Ed. 57 S.Ct. Court,

In since the Act’s years Wagner passage, Supreme Courts and National Labor Relations Board have established Appeals, conclusively the right in collective action includes the engage of actions in pursuit (Eastex, (1978) 556, 428, Inc. court. v. NLRB 437 U.S. 565-566 L.Ed.2d “ S.Ct. Act’s ‘mutual aid Wagner protection’ or clause 2505] [the protects from by retaliation their when employees they seek to employers improve conditions resort to working ..”]; administrative and through judicial forums . Brady (8th 2011) 661, v. National League Football Cir. 644 F.3d 673 [“a filed in good by lawsuit faith to achieve group more favorable employees or terms conditions of is ‘concerted activity’ under 7 ...” of employment Act]; 18, Wagner (1998) 13, Mohave Electric Cooperative 327 N.L.R.B. (D.C. by enforced Mohave Elec. Inc. v. Co-op., 2000) N.L.R.B. Cir. 340 U.S. 391, 1183, [same]; 206 F.3d Altex App.D.C. Mixed Ready 699-700, (1976) Concrete 223 N.L.R.B. Corp. enforced by Ready Altex Concrete (5th Mixed Corp. Cir.) [same]; N.L.R.B. 542 F.2d Leviton 1973) Inc. v. Manufacturing Company, (1st N.L.R.B. Cir. 486 F.2d [same].) This to the right extends and hour class filing wage (United actions Service, 1015, 1018, (1980) Parcel Inc. 252 N.L.R.B. enforced N.L.R.B. v. Service, (6th United Parcel 1982) 421), Inc. Cir. 677 F.2d including wage class actions filed (see former like Iskanian employees Trucking, Harco (2005) 344 482). LLC N.L.R.B. Act thus Wagner as prohibits, labor unfair interference practice, with of current or employer ability former join collectively litigation.

II. Today’s class waivers are the descendants of last century’s dog yellow (See (Jan. 2012) contracts. D.R. & Cuda Horton 357 N.L.R.B. No. 6.) CLS adhesive form Transportation’s contract includes a clause prohib Iskanian, like all its iting employees, from class or pursuing representative .5 Thus, suits or class arbitrations not Iskanian file may with collectively sources, fully assistance from various he controlled bill’s contents from introduction Rights (Morris, Rights: Fulfilling Collective as passage.” final Wagner’s Human Senator Democracy Workplace Fly Promise Eagle Again in the Blue (2005) Can U.S.F. —The 701, 709.) L.Rev. law, The clause provides: “[EJxcept (1) under required applicable otherwise EM and agree PLOYEE COMPANY expressly intend that class action and representative asserted, procedures action shall not they apply, pursuant be nor will this Policy/Agreement; that each agree EMPLOYEE COMPANY will not assert class otherwise; representative against action action claims other in arbitration or each own, only of EMPLOYEE and shall individual COMPANY submit their claims in arbitration 402 of claim CLS’s challenging any a an arbitration suit or

fellow employees the the clause effect of Patently, or policies. employment practices cause to better rights common to enforce from making prevent employees this, the from indistinguishable In clause is working and conditions. wages the Wagner contracts Norris-LaGuardia yellow dog prohibited Indeed, to collective action is to Acts. the whole point protecting CLS clause forbids— allow to do what precisely Transportation’s their rights employer. assert against band as a together group peaceably follows. An waiver is without effect necessarily employer That the class rights guaranteed by contract an renounce may require employee not by (Nat. 350, (1940) Labor U.S. Act Co. v. Board 309 Licorice Wagner 799, 569]; id. at L.Ed. see 364 cannot [“employers 359-361 S.Ct. Act their workmen to by inducing set the National Labor Relations at naught . . .”]), the duties it to demand which agree performance imposes not to resolve disputes this includes a contract clause requiring employee individual, a clause antithesis of very arbitration. Such “is binding collective action.” collective . . . restraint bargaining impose[s] upon [and] 752, 756; (National (7th 1942) 125 F.2d Labor Relations Board v. Stone Cir. 4, 11, & 308 N.L.R.B. fn. 5 law see Barrow Utilities Electric [“The dog has been clear that all variations of venerable contract’ ‘yellow long invalid.”].) are contract thus contravenes directly restriction in Iskanian’s on its A clause labor law and is invalid face. contract statutory federal (Kaiser Act Corp. violates the is unenforceable. Steel Mullins Wagner 72, 833, 851]; 83-86 L.Ed.2d J. I. Case Co. v. (1982) 455 U.S. S.Ct. L.Ed. (1944) 321 64 S.Ct. [private Labor Board U.S. that conflict with the Act must the Act Wagner “obviously yield contracts on the may be reduced to a Iskanian not be basis futility”].) would prevented, contract, from with class action. proceeding putative his III. this CLS invokes FAA as Notwithstanding authority, Transportation the class waiver. grounds upholding judicial

In the 20th merchants faced early century, hostility part merchants; entered their fellow agreements arbitration with they predispute the courts enforce such on the agreements, relying declined to routinely, to arbitrate rule that enforcement of was specific agreements common law Sess., (1924); Cong., 68th unavailable. No. 1st (H.R.Rep. Wasserman, Box, Teach Process in a or What Class Action Waivers Us Legal person.” (“Proprietary other Information and represent not seek to interests of will 16(b) (Iskanian’s contract).) Policy/Agreement,” Arbitration About Law-making 395.) U. Chi. Loy. L.J. In Congress enacted the FAA Its have was to response. purpose agreements the same as other contracts.” No. “placed upon footing (H.R.Rep. FAA, (Moses H.

Section 2 of the Cone its substantive “primary provision” 1, v. Constr. 765, Hospital Mercury Corp. (1983) 24 460 U.S. L.Ed.2d 103 [74 927]), S.Ct. makes this An arbitration “shall point explicit: agreement be valid, irrevocable, enforceable, save such and upon grounds as exist law or in the any revocation contraer (9 2, equity U.S.C. added). italics § of Here, we with a the deal waiver of provision statutorily right protected —the contract, to collective in action —that would be unenforceable engage in of whether as an arbitration clause or otherwise. The FAA part codifies a indicates, nondiscrimination clause’ in 2 principle; ‘saving “[a]s § Congress of in was to make purpose 1925 arbitration as enforce agreements contracts, (Prima Paint v. & able as other but more Flood Conklin not so.” 395, 404, 1270, (1967) 12 1801].) 388 U.S. fn. L.Ed.2d 87 S.Ct. That [18 is not in arbitration purpose upset by clauses and precluding, employment alike, contracts class waivers mandatory forfeiting to in right engage action, a collective 3 right foreshadowed section of the Norris-LaGuardia Act and section 7 of the Act. guaranteed by there is Wagner no Accordingly, Acts, conflict between FAA and the Norris-LaGuardia and nor Wagner is there in the FAA that would anything disregard of the substantive permit rights guaranteed by those later enactments. conflict,

Were one to text perceive of the Norris-LaGuardia express Act law, would resolve it. The act prior 1932 supersedes including any in the contrary FAA: “All and in provisions 1925 acts of acts conflict parts with the (29 of this are provisions chapter 115.) U.S.C. repealed.” effect of this provision, (29 combination with section 3 103) U.S.C. § and the banning yellow dog (9 contracts FAA’s section 2 U.S.C. 2),§ contracts, arbitration to the subjecting agreements same limits as other is to render unenforceable contractual to equally obligations forswear collective action in regular agreements and in employment employment agreements.

Brief reflection on the Act underlying Norris-LaGuardia and purposes Act Wagner demonstrates this must be A strike so. for better and why wages (Labor Board v. Erie Resistor working conditions is core protected activity. Corp. (1963) 221, 308, 373 1139]; U.S. 233-235 L.Ed.2d 83 S.Ct. [10 Automobile Workers v. O’Brien 454, (1950) 978, U.S. 456-457 L.Ed. 781].) 70 S.Ct. Bd. Washington Aluminum Co. So too is a walkout. {Labor (1962) N.L.R.B. v. McEver 1099]; 370 U.S. L.Ed.2d 82 S.Ct. Intern., 634, 639; Inc. Vic (5th 1986) Engineering, Tanny Inc. v. Cir. 784 F.2d N.L.R.B. (6th 1980) 240-241.) Cir. 622 F.2d But the declared expressly (29 industrial strife. Act is to minimize of the Wagner

fundamental purpose organize law the employees U.S.C. § [“[P]rotection by removing flow commerce necessary bargain” “promote[] unrest”]; Brooks v. Labor see of industrial strife certain sources recognized 75 S.Ct. L.Ed.2d U.S. 176] [“The Board Atleson, Values is industrial peace.”]; of Wagner underlying purpose [the Act] common most American Labor Law [“The Assumptions that it would reduce industrial of the Act was Wagner in favor argument “seeks, United of the States Act borrow strife.”].) phrase The Wagner Court, (of collective action employees) ‘to make the appropriate Supreme ” No. 74th Cong., of strife.’ (H.R.Rep. rather than peace instrument Sess., in an arbitration If a class waiver provision 1st enforceable, would be Iskanian and other were deemed agreement but strikes or walkouts they through precluded if elected protected protest action—a result collective resolving through from grievances peaceable at heart the the in industrial strife the to reduction precisely opposite have favored less means Congress Act’s would not Wagner goals. peaceable over more ones. peaceable a action ban in an if the device of collective

Alternatively, inserting the to insulate the ban from Norris-LaGuardia arbitration clause were enough every could include in adhesive employers and Acts’ Wagner proscriptions, controversies, and a that all not disputes contract employment requirement claims, and thus effec- through be resolved hour just wage activities intended those acts Congress ban the full of collective tively range the gut of the various acts would harmonizing to Such a protect. purported ” “ laws; the action would be a mockery.’ (H.R.Rep. labor ‘collective right Sess., invalidated 72d 1st at When Cong., p. Congress No. action, in collective it the dog protected right engage contracts yellow it at the only have enforceable conveying rights grace could not believed was the erase expedient who could at their election them simple employers, a in an arbitration agreement. waiver inserted compelled AT&T LLC v. 563 argues Mobility Concepcion CLS Transportation v. CompuCredit U.S. L.Ed.2d 131 S.Ct. Corp. 1740] [179 U.S._[181 586, 132 S.Ct. save its (2012) 565 L.Ed.2d Greenwood 665] class does. waiver. Neither as a matter of obstacle preemption considered whether

Concepcion law rule to class waivers unconscionability FAA a state applicable foreclosed at (AT&T LLC v. U.S. Mobility Concepcion, supra, in consumer contracts. entailed 1746].) It did not to the considerations S.Ct. at p. speak p._[131 did it address federal statutes. Nor reconciling in the FAA with other coequal of Congress’s labor particulars subsequent legislation codifying action, substantive collective employees’ rights engage rights not shared consumers. Greenwood, Corp. v. CompuCredit U.S._[132 S.Ct. There, of no assistance. similarly Court reaffirmed Supreme determine whether FAA’s in favor of enforcing arbitration presumption claim, ato one ask applies given clauses must whether the has presumption “ ” been ‘overridden aby contrary command’ congressional other federal (Id. at law. 669].) S.Ct. claims at there p.__ issue arose under “ ‘ ’ ” a federal law that guaranteed consumers notice of a to sue.” “right (Ibid., 1679c(a).) 15 U.S.C. Had Congress intended to quoting preclude act, arbitration as a suitable forum under the “it would applicable have done so in a manner less obtuse” than one offhand reference to to sue. _ contrast, (CompuCredit, 672].) S.Ct. at In Norris- LaGuardia Act and Wagner Act no present similar difficulties for discerning contrary congressional command. Such command be evident may from “the statute], text of its legislative an ‘inherent history, [other conflict’ between arbitration and the (Gilmer underlying purposes.” [other statute’s] Interstate/Johnson Lane Corp. (1991) 500 U.S. L.Ed.2d 1647].) S.Ct. Each such source here: supplies support conclusion class waivers are foreclosed arises not from a inferences from lone gleaned text, as in CompuCredit, phrase, but from the and explicit legislative history acts, core of the all the to purpose establishing right collective action and the ante, of contractual illegality (See waivers of that I. compelled right. & pts. II.) to

Refusing enforce National Labor Relations Board order a class finding Act, waiver the violative of Wagner divided Fifth Circuit reached a contrary Horton, (D.R. Inc. v. N.L.R.B. conclusion. (5th 2013) Cir. 737 F.3d 344 (Horton II), Cuda, enforce D.R. Horton & to declining supra, 357 N.L.R.B. 184.) No. The analysis assumed a majority’s congressional command super the FAA could come seding only from “the of general thrust the [Wagner II, it (Horton its of operates, goal at equalizing bargaining Act] power” —how and 360) the p. “congressional intent to ‘level the field’ between playing (id. and 361), workers at the employers” sources found insuffi majority cient. One need not look such to and generalized abstract indications. As discussed, the FAA subordinates arbitration to agreements generally appli cable (9 bars against 2), contract enforcement the U.S.C. Act Wagner § by its text bars from employers contractually on conditioning employment of waiver the to in collective right engage (29 action U.S.C. §§ Board, see Nat. Licorice Co. Labor 158(a)(1); v. supra, 309 U.S. at 359-361). Rules Civil 23 of the Federal of in the fact rule II also took comfort Horton actions, until was not 1966. (28 U.S.C.), adopted class Procedure governing (Horton II, most current 362.) But that the prevalent 737 F.3d the Act at its Wagner does not mean recent litigation form of collective collective in litigation the right did not shield from waiver inception law actions via the common doctrine available. Collective whatever manner are much older of based on equity principles, of representation, virtual (Arias Court 46 Cal.4th Superior 23. than rule vintage J.).) of “The 74th (cone. Werdegar, P.3d opn. Cal.Rptr.3d on often is advanced fronts that labor’s cause enough knew well Congress the settlement within immedi and grievance other than collective bargaining by choosing, language this fact as recognized ate context. It employment clear, activities for the somewhat broader concerted of 7 makes protect aid as well as for the narrower purposes of ‘mutual or protection’ purpose ” NLRB, (Eastex, Inc. v. bargaining.’ and ‘collective ‘self-organization’ Act shields concerted Wagner The language 437 U.S. broad including pursued, mutual aid or whatever means activity protection collective suits. through peaceable end, rests on the notion that the FAA

In argument CLS Transportation’s limiting be super-statute, application should interpreted operate construe every may both future enactments particular. “[M]en past of the themselves.” things after their fashion/Clean from things purpose Caesar, I, 34-35.) this act scene lines So it is with Julius (Shakespeare, history The Norris-LaGuardia legislative view of the FAA. text Acts, FAA than our far closer time by legislators and Wagner passed of collective action current show no such deference. vantage point, need not they yield. codify

I dissent. respectfully

Case Details

Case Name: Iskanian v. CLS Transportation Los Angeles, LLC

Court Name: California Supreme Court

Date Published: Jun 23, 2014

Citation: 173 Cal. Rptr. 3d 289

Docket Number: S204032

Court Abbreviation: Cal.