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A California Court of Appeals remanded a case to the trial court to decide if the class action waiver in an employment arbitration agreement should be enforced.
In Iskanian v. CLS Transportation Los Angeles LLC, No. B198999, 2008 WL 2171792 (Cal. Ct. App. May 27, 2008), an employee, Iskanian, sued his employer, CLS Transportation (CLS), as part of a class of employees for failing to pay statutorily required overtime compensation. CLS successfully moved to compel arbitration individually based on an arbitration agreement in the employment contract that also contained a class waiver.
Soon after the trial court granted CLS’s motion to compel arbitration, the California Supreme Court decided Gentry v. Superior Court, 42 Cal. 4th 443 (2007), a major case addressing the issue of class action waivers in overtime cases. Gentry held that a class waiver should not be enforced if a trial court determines, based on specific factors, that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.
Gentry held that class arbitration waivers in overtime cases were not categorically unenforceable, but that the trial court should consider several factors in determining if class arbitration would be significantly more effective than individual arbitration: the modest size of the potential individual recovery; the potential for retaliation against members of the class; the fact that absent members of the class may be ill informed about their rights; and other real world obstacles to the vindication of class members’ rights to overtime pay through individual arbitration.
Accordingly, the Court remanded the case to the trial court to determine if the class waiver was valid and enforceable in light of the holding in Gentry, "[a]ssuming the matter is not moot due to Iskanian’s satisfaction with the arbitration which has been ordered."
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