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Class Action Waivers Valid in Arbitration & Employment Contracts

The California Supreme Court upholds class action waivers in arbitration agreements and employment contracts.

The California Supreme Court's decision in Iskanian v. CLS Transportation Los Angeles, LLC, confirmed that an express class action waiver in an employment arbitration agreement is enforceable under California law. The California Supreme Court confirmed, in light of the United States Supreme Court's pronouncements, that Gentry's rule against class action waivers in employment actions is preempted by the FAA and no longer is good law: "Under the logic of [the United States Supreme Court's decision in] Concepcion, the FAA preempts Gentry's rule against employment class waivers," since it frustrates the fundamental purpose of the FAA (i.e., streamlined and quick proceedings). Thus, it now is clear that class action waivers can be enforced in employment matters.

The class action waiver was specifically based upon the protections and policies found in the FAA. One of the policies is to streamline proceedings for quicker resolution. This policy may also apply to other types of contracts such as leases, and governing documents for Davis-Stirling real estate communities.

Arbitration is a tool used in many contracts to expedite resolution of disputes. Historically, plaintiffs have used class actions to avoid arbitration and take their case to a jury.   Under this new decision by the California Supreme Court finding that waivers of class action are valid within an arbitration agreement, it may be possible to fashion your arbitration agreement to include this wavier.  

If you need additional information regarding the potential waiver of class actions in your contracts or arbitration, please contact Ariel Bedell, Senior Counsel, at The Loftin Firm, P.C.

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