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Don’t rely on arbitration agreements that require class-action waivers

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in Employment Law,Human Resources

The California Court of Appeal has yet again ruled against employers in an arbitration rights case. This time, the issue was whether employers can use arbitration agreements to limit so-called class- or collective-action claims.

The apparent answer is “no.”

Recent case: Reyna signed an arbitration agreement when she first went to work for Apartment Invest­­ment and Management Co. In it, she and the company agreed to submit all employment-related claims to binding arbitration and that neither would bring class- or collective-action claims. Plus, the agreement prohibited arbitrators from considering such claims on their own.

After Reyna was fired, she filed a representative claim under Cali­­for­­nia’s Private Attorneys General Act (PAGA), claiming her former em­­ployer had violated the Labor Code. The former employer requested ­arbitration—and only of her individual claim.

The trial court sided with Reyna, holding unconscionable the agreement as it applied to collective- or class-action waivers.

The employer appealed. Mean­­while, the California Supreme Court held that arbitration agreements that waive representative claims under PAGA are unenforceable. As a result, the case will be heard in court, not in arbitration. Plus, Reyna can represent others similarly situated in that lawsuit. (Ybarra v. Apartment Invest­­ment and Management Com­­pany, No. B245901, California Court of Appeal, 2014)

Final note: Be sure to have counsel review your current arbitration agreement, if you use one. It may be out-of-date and need revisions to make it legally binding.

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