The next U.S. Supreme Court term begins on Monday, October 2, 2017. According to the argument schedule, which was just released, three consolidated cases involving the validity of class actions waivers in employment arbitration agreements will be the first cases heard by the Court. The Court's anticipated decision in Lewis (7th Circuit), Morris (9th Circuit) and Murphy Oil (5th Circuit) will like be the most significant employment decision issued by the Supreme Court in the past decade. If the Court upholds the use of class action waivers, we will likely see the end of class action cases being brought by employees. Why? Employers will require employees to sign away their rights to sue in court as a condition of employment, which courts have repeatedly held is perfectly legal. Employers will instead require employees to bring their claims through the private arbitration system. And, employers will require that employees bring only individual claims against the employer, and not join with any of their co-workers.
When an employee comes into my office and says she has $5,000 in unpaid wages, it's just not economically feasible for me to take that case. I don't typically get paid by the hour - I only earn a percentage of what I recover for my clients. But, if an employee comes into my office and says she and 500 of her co-workers have $5,000 in unpaid wages, for a total of $2.5 million in unpaid wages, I could take on that case and still pay my rent. Long story short: if class actions go away, private employment lawyers like me will not be able to take on smaller individual wage claims, and the wage-and-hour laws for those workers will no longer be enforced.
The only ray of sunshine in California is that employees can still bring representative Private Attorney General Act (PAGA) claims in court, and cannot be required to bring them in arbitration. At least for now.
On July 13, 2017, the California Supreme Court issued a blockbuster decision in Williams v. Superior Court, holding that plaintiffs who bring representative wage-and-hour actions under California's Private Attorney General Act ("PAGA") have broad discovery rights and are entitled to obtain a the names and contact information of other "aggrieved employees" without making a heightened showing that the employer has violated the law. This is the most significant PAGA decision since the Supreme Court held in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), that an employee’s right to bring a representative PAGA action may not be waived through a forced arbitration agreement.
While employers will undoubtedly bemoan the Williams decision, let's just remember that we are on the precipice of a Supreme Court decision in the 2017-2018 term that will likely eviscerate wage-and-hour class actions on a nationwide basis. If the Supreme Court rules as I suspect they will, PAGA will be the only remaining vehicle for employees to bring representative wage-and-hour actions. This shifting class action landscape was undoubtedly on the minds of the Cal Supremes when they issued the pro-employee Williams decision yesterday.
While employment class actions are likely on their way out the door, employees in California can still pursue representative claims on behalf of themselves and other affected employees under the Private Attorney General Act, aka "PAGA." Under PAGA, an "aggrieved employee" can seek penalties and unpaid wages against an employer for violations like the failure to pay overtime and minimum wage, and the failure to provide meal and rest breaks. In Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), the California Supreme Court held that an employee cannot be compelled to waive her right to bring a representative PAGA claim in a predispute arbitration agreement. In a trio of cases decided in the past year, the California Court of Appeals held that employers cannot use predispute arbitration agreements to compel a PAGA case to arbitration. See Betancourt v. Prudential Overall Supply, 9 Cal.App.5th 439 (2017); Hernandez v. Ross Stores, Inc., 7 Cal.App.5th 171 (2016); and Tanguilig v. Bloomingdale’s, Inc., 5 Cal.App.5th 665 (2016). This means that employees who have signed arbitration agreements can still bring their representative PAGA actions in court. In response to Iskanian and its progeny, the employer lobby, including the Chamber of Commerce, is hard at work trying to pass legislation to limit PAGA's reach. Their efforts so far have been largely unsuccessful, but who knows what next year's legislative session will bring.
On Thursday, July 13, 2017, I will be speaking at the California State Bar Labor & Employment Section's Advanced Wage and Hour Conference. I will be presenting the 2017 Annual Update, along with Jeffrey Ranen from Lewis Brisbois LLP. The past year has seen a lot of exciting developments -- some good, some bad and some downright ugly. One of the worst developments for employees is the appointment of Justice Gorsuch to the U.S. Supreme Court. Next term, the Supremes will decide whether class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act (NLRA), which guarantees employees the right to engage in "concerted activity" for their mutual aid and benefit. The Seventh and Ninth Circuits have held that Section 7 means that employees can join together to bring work-related claims against their employers, and that class action waivers in arbitration agreements are illegal because they violate the NLRA. The Fifth Circuit went the other way. With Justice Gorsuch on the bench, it seems likely that the Supremes will side with the Fifth Circuit and rule that class action waivers are perfectly fine, following in the footsteps of Concepcion and other cases in the consumer context that have blessed class action waivers. Fear not - the past year had some positive developments for employees, and I will post about those next time.
Lauren Teukolsky is the founder and owner of Teukolsky Law, A Professional Corporation.