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California Surpreme Court rules on class action waivers

The California Supreme court recently issued a ruling in a case that involved class action waivers. Initial reports of the decision said that the benefit was on the side of employers, but analysis of the 70-page court ruling may indicate that there are benefits and disadvantages for both sides.

The legal matter began when an employee of a limousine company signed a waiver that bound employment-based claims under arbitration agreements. The agreement included a waiver on class actions. The employee later filed a lawsuit against the limousine company, alleging failure provide appropriate breaks, pay overtime and reimburse expenses associated with business. The employee alleged that the company was in violation of state labor codes.

The limousine company filed a motion to compel arbitration in the case rather that see the legal matter play out in court. Because of the initial waiver, the court granted the arbitration motion. The employee appealed that ruling and the appeals court remanded the case due to a 2004 ruling from the state Supreme Court that requiring employees to sign class action waivers could be unconscionable.

In 2011, the U.S. Supreme Court ruled in a separate, but related case. The ruling stated that state laws governing waivers were preempted by federal laws when attributes of arbitration were concerned. Because of that ruling, the California Supreme Court ruled that arbitration could be mandated in the limousine company case because of the original waiver. That ruling also means a class action suit in the case was moot.

Employment law can be complex, and individuals should work to understand any document they sign in the course of employment. If a document contains legal language, seeking assistance in understanding the possible outcome of signing or not signing the document can protect a person's rights in the future.

Source: Bloomberg BNA, "California Justices Back Class Action Waiver But Decide a PAGA Claim Is Not Preempted" Lawrence E. Dube, Jun. 24, 2014

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