Today, the California Supreme Court issued the long awaited decision in Gentry regarding the enforceability of class action waivers in arbitration agreements. The Court held, in a 4 to 3 decision, that “at least in some cases, the prohibition of classwide relief would undermine the vindication of the employees’ unwaivable statutory rights and would pose a serious obstacle to the enforcement of the state’s overtime laws. Accordingly, such class arbitration waivers should not be enforced if a trial court determines, based on the factors discussed below, that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.” In making the determination in an overtime case, the trial court will have to look to the following factors:
(1) “the modest size of the potential individual recovery”
(2) “the potential for retaliation against members of the class”
(3) “the fact that absent members of the class may be ill informed about their rights”, and
(4) “the other real world obstacles to the vindication of class members’ right s to overtime pay through individual arbitration.”
The Court noted that “we cannot say categorically that all class arbitration waivers in overtime cases are unenforceable.” The Court also stated that “we do not foreclose the possibility that there may be circumstances under which individual arbitrations may satisfactorily address the overtime claims of a class of similarly aggrieved employees, or that an employer may devise a system of individual arbitration that does not disadvantage employees in vindicating their rights under section 1194. But class arbitration waivers cannot, consistent with the strong public policy behind section 1194, be used to weaken or undermine the private enforcement of overtime pay legislation by placing formidable practical obstacles in the way of employees’ prosecution of those claims.” A copy of the Court’s decision is attached to this email.
Keesal, Young & Logan Employment Group