Employees routinely enter into employment contracts that contain arbitration agreements and prohibit them from bringing class and/or representative actions. These employees may therefore only bring claims against their employers, whether contractual or statutory, in arbitration on an individual basis. Such arbitration agreements and the class/representative action waivers that they contain are enforced nationwide pursuant to the Federal Arbitration Act (FAA). In California, however, a judge-made rule (the Iskanian rule) prohibits the enforcement of representative action waivers found in arbitration agreements with respect to employees’ claims of Labor Code violations under California’s Private Attorney General Act (PAGA). A judicial battle is currently raging between the state and the federal courts in California concerning the tension between the FAA and PAGA created by the Iskanian rule. This PAGA saga—the split between the courts in California—is now before the United States Supreme Court. This Article examines the state and federal courts’ respective interpretations of the Iskanian rule and discusses the weaknesses in their approaches. The Article argues that unless the Supreme Court reverses its long-standing course, the Court’s current precedent leads to the invalidation of the Iskanian rule under both the state and the federal judicial approaches because the rule is preempted by the FAA. The impact of the Supreme Court’s decision with respect to PAGA will likely be felt far beyond California. The decision will be relevant to the interpretation and application of the FAA more generally, as well as to other private attorney general statutes that might intersect with the FAA.
The PAGA Saga,
2021 Pepp. L. Rev.
Available at: https://digitalcommons.pepperdine.edu/plr/vol2021/iss1/2