Thursday, January 21, 2016

U.S. Supreme Court Rules against Defendants’ Attempts to Shut Down Employment and Consumer Class Action Suits by Paying Off Named Plaintiffs

On Wednesday the U.S. Supreme Court handed a rare 6-3 victory to consumers and employees seeking to bring class claims in Campbell-Edwald Co. v. Gomez. The Court was tasked with deciding whether a defendant can properly dispose of a class case by offering full relief to the named plaintiffs in an effort to render moot their individual claims and thus get rid of the entire case. Such efforts by defendants to dispose of class cases by paying off the named plaintiffs have become commonplace in consumer and employee class actions.

The case involved a consumer class action under the Telephone Consumer Protection Act (TCPA) against a Navy contractor hired to send recruiting text messages to young people. The TCPA prohibits sending such marketing text messages without the cellular phone user’s prior consent. Jose Gomez, who had not provided consent and nonetheless received the Navy’s recruiting text message, filed suit on behalf of a putative consumer class seeking treble statutory damages for Cambell-Edwald’s knowing and willful violation of the TCPA, as well as an injunction against further unsolicited text messages by Campbell-Edwald.

Before Mr. Gomez’s deadline to file a motion for class certification, Campbell-Edwald filed an offer of judgment to Mr. Gomez under Federal Rule of Civil Procedure 68. Mr. Gomez did not accept that offer. However, Campbell-Edwald contended that by providing Mr. Gomez with an offer of complete relief, his claim became moot. Because his claim was mooted before he moved for class certification, Campbell-Edwald argued, the putative class claims also became moot. The district court rejected those arguments and ruled in favor of Mr. Gomez on that issue. The Ninth Circuit Court of Appeals agreed.

At the Supreme Court, Justice Ginsberg wrote for the majority, joined by Justices Kennedy, Breyer, Sotomayor, and Kagan. (Justice Thomas concurred in the judgment but did not sign Justice Ginsberg’s majority opinion.) Ultimately, Justice Ginsberg resolved the mootness question according to fundamental principles of contract law, stating that “an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”

In reaching that conclusion, Justice Ginsberg addressed a 2013 decision of the Court, Genesis HealthCare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), a collective action brought by employees under the Fair Labor Standards Act. In that case, the named plaintiff had conceded in the lower courts that her individual claim was rendered moot when she did not accept her employer’s Rule 68 offer to settle her individual claim. Based on that early concession, a five-justice majority held that without a named plaintiff’s live individual case, a class suit could not be maintained. The four dissenting Justices, led by Justice Kagan, argued that the employee’s unaccepted offer of judgment could not properly moot a case.

Justice Ginsberg thus adopted the reasoning of Justice Kagan’s dissent in Genesis HealthCare and secured a majority with the votes of Justices Kennedy and Thomas. The decision was a rare victory for employees and consumers before a Supreme Court that has often been hostile toward class action lawsuits. See previous blog posts here, here, and here. Justice Kennedy’s decision to join the majority in deciding not to dispense with class actions as a means to vindicate vital statutory rights – including job protections--should delight employee and consumer advocates.

The argument advanced by Chief Justice Roberts and the dissenters is a cynical one in its claim that a lawsuit brought on behalf of a class is rendered moot if the defendant offers to pay off the named plaintiffs, even if those named plaintiffs refuse the payment. The Chief’s contention that no live case or controversy exists because a defendant offers to resolve one of potentially thousands of putative class members’ claims cannot be taken at face value.

Practically speaking, what company would not pay a few thousand dollars to the named plaintiffs to escape the possibility of multi-million dollar exposure? Simply put, a seemingly small point of procedural law could have spelled the end of vigorous enforcement for numerous employee and consumer protections enacted by Congress.

Although Justice Ginsberg confined her majority opinion to a relatively narrow set of facts—suggesting the outcome could be different if Mr. Gomez had in fact accepted full payment—employees, consumers, and those who advocate on their behalf can breathe a collective sigh of relief that class actions will live to fight another day.

U.S. District Court Finalizes Approval for Distribution of $36 Million in Landmark Bank of America Wage Settlement

“Your lawyering has just been excellent….I think the results were exceptional; and by that, I mean, there were tremendous risks for the plaintiff….So you have nothing but the Court's praise and compliment. I think you're excellent counsel. You worked very hard. Your briefing was just extraordinary.”

--Hon. David O. Carter, United States District Court, Central District of California (addressing Bryan Schwartz and other counsel, approving their $36 million settlement of wage claims, Jan. 19, 2016)

On January 19, 2016, Bryan Schwartz Law’s principal announced court approval of a $36 million settlement between Landsafe Appraisal Services, Inc., a subsidiary of Bank of America (NYSE: BAC) and 369 current and former employees working as residential real estate staff appraisers. At the hearing where final approval was granted, the federal court in Orange County, Judge David O. Carter, remarked on the exceptional result and the excellent representation provided throughout the lawsuit, which alleged wage violations. Plaintiffs and the other class members should receive average gross payments of nearly $100,000 within the next month.

The lawsuit was first filed in April 2013 in federal court in Orange County. It alleged that Bank of America erroneously applied the "administrative" and "professional" exemptions to residential staff appraisers. Plaintiffs maintained that they typically worked from early in the morning until late at night, churning out reports that are a required part of every mortgage loan. The job required no special academic degree - just a state license. 

In approving the settlement, at the hearing, the court noted favorably that, as a result of the lawsuit, the new owner of Landsafe – CoreLogic – has begun paying all appraisers overtime.

One of the named plaintiffs, Ethel Joann Parks of Manteca, California worked for Bank of America’s Landsafe until 2012. For years, she regularly toiled from 6 a.m. to 10 p.m. completing appraisal reports and, in the process, missing out on daily life and major family events. Rarely did she have time throughout the day to take a break to eat or rest because the artificially short deadlines set by Bank of America forced her to constantly keep working.

Ms. Parks decided to step forward because she felt that bank failed to treat her, and other staff appraisers, “as human beings” with “family and personal needs that should be acknowledged.” She added, “I am vindicated by this lawsuit and the exceptional relief obtained on behalf of the class.  I hope it will force banks and appraisal management companies throughout the country to reconsider pressuring their staff appraisers to work long hours without paying overtime.”

“We are delighted by the court’s recognition of this outstanding result, which not only provides meaningful compensation to hundreds of people, but, we hope, will lead to industry change for many thousands more,” said Bryan Schwartz, founder of Bryan Schwartz Law, lead counsel for the 369 class members, along with the Los Angeles-based firm of Schonbrun Seplow Harris & Hoffman. 

Witnesses supporting the settlement, including an appraiser and industry expert, testified that, as Schwartz hopes, the settlement will send waves and affect change throughout the real estate appraisal industry.

Judge Carter certified a nationwide class action in December 2013 under the federal Fair Labor Standards Act, and certified a class action in California in June 2014 under the California Labor Code. In May 2015, the Court granted plaintiffs summary judgment as to the major defenses Bank of America was asserting, and rejected the bank’s effort to kick the suit out of court.  This resulted in a ruling under which Bank of America would likely owe the workers considerable back wages for overtime and missed meal and rest periods.

The bank then asked the Court for permission to appeal the summary judgment decision immediately, denying any wrongdoing. The case was set to go to trial in August 2015, but the parties reached the $36 million settlement finally approved this week.

For Attorney Schwartz, this is just one of many recent settlements in service of employees who were denied lawful compensation for their efforts.  In 2014, Schwartz and his co-counsel settled another part of the same case against Bank of America (as to review appraisers) for $5.8 million. This makes nearly $42 million for workers in the suit as a whole.  Schwartz has also achieved numerous other multi-million dollar settlements on behalf of thousands of misclassified workers nationwide.

“Employers take grave risks by cutting corners, and not fairly compensating their employees in tune with state and federal law.  My firm and many others, including my co-counsel, are working to end wage theft in the economy…quickly,” added Schwartz.

The case is Terry P. Boyd et al. v. Bank of America Corp. et al., case number 8:13-cv-00561, in the U.S. District Court for the Central District of California.

# # #
Bryan Schwartz Law is dedicated to continuing the struggle for civil rights and equality of employment opportunity and helping Americans from every background to achieve their highest career potential. The firm has recovered tens of millions of dollars in individual, class, and collective actions involving discrimination and retaliation, harassment, denied disability accommodations, whistleblower reprisal, wage and hour violations, Federal employees' rights, and severance negotiations.  

Wednesday, January 13, 2016

Court Sanctions Defense Attorney for His Sexist Remarks to Opposing Counsel

In a clarion call for civility among attorneys, Magistrate Judge Paul Grewal granted plaintiffs’ motion for sanctions in a civil rights case,[1] and excoriated defendants’ attorney for “repeatedly and unapologetically flout[ing]” the Northern District of California’s Guidelines for Professional Conduct[2], the Federal Rules of Civil Procedure (FRCP), the court’s prior order, and – in this firm’s opinion – offending standards of basic civility most of us learned on the playground, as children.[3] The order is available here.

            Defendants’ attorney produced documents relevant to a deposition in a “physically cracked and unusable disc” on the day of said deposition, delayed correcting this abjectly deficient production for over a month after being repeatedly asked to do so by plaintiffs’ counsel (only to produce documents defendants’ attorney already knew to be in plaintiffs’ possession), made “extremely long speaking objections” in corrective depositions ordered by the court, and many more violations.[4] Tellingly, defendants’ attorney made “no attempt to defend any of this conduct.”[5]

            Escalating his disgraceful misconduct from unprofessionalism to sexism, defendants’ attorney told one of the plaintiffs’ female attorneys, at a deposition she was taking, “[D]on’t raise your voice at me. It’s not becoming of a woman ….”[6] In briefing his opposition to plaintiffs' sanctions request, defendants’ attorney doubled down on his statement with a sorry-not-sorry apology.[7]

As M.J. Grewal explains in his order, defendants’ attorney’s attack “endorsed the stereotype that women are subject to a different standard of behavior than their fellow attorneys.” M.J. Grewal further elaborates that such gender-based vitriol “reflects not only on the attorney’s lack of professionalism, but also tarnishes the image of the entire legal profession and disgraces our system of justice.” The Court found that such statements – in addition to harming the many female attorneys that regularly endure similar treatment – degrades the legitimacy of the legal system itself.

Gendered attacks “reflect and reinforce the male-dominated attitude of our profession.”[8] At a time when the opportunity for female attorneys to advance to leadership roles in law firms remains stymied,[9] our profession should, at the very minimum, not tolerate such Mad-Men-styled sexism from its members.

Fortunately, M.J. Grewal suffers no fools. Because of defendants’ attorney’s egregious misconduct, M.J. Grewal awarded plaintiffs their fees and costs in bringing the motion for sanctions, as well as attorneys’ fees for depositions, including the deposition during which the sexist comment was made. Recognizing that monetary compensation for plaintiffs’ attorneys' fees and legal costs falls short of a just result, M.J. Grewal ordered the “specific and appropriate sanction” of compelling defendants’ attorney to “donate $250 to the Women Lawyers Association of Los Angeles Foundation … and submit a declaration to the court confirming his compliance with this order.”[10]

Courts should emulate Magistrate Judge Paul Grewal, enforcing both women’s equality and basic civility in the legal profession.

[1] Claypole v. Cnty. of Monterey, No. 14-cv-02730-BLF (filed June 12, 2014). More information regarding the case can be found here.
[2] The Northern District of California’s Professional Guidelines are available here:
[3] Claypole, No. 14-cv-02730-BLF, slip op. at 1 (N.D. Cal. January 12, 2016).
[4] Id. at 2-3, 5.
[5] Id. at 6.
[6] Id. at 8.
[7] Id. (Defendants’ attorney “offered only a halfhearted politician’s apology ‘if [he] offended’ Plaintiff’s counsel, and he nevertheless tried to justify the comment because it ‘was made in the context of [Plaintiff’s counsel] literally yelling at [his] client and creating a hostile environment during the deposition’ … Other than his own characterization, [Defendants’ attorney] offers no deposition excerpts or other evidence that suggests this.")
[8] Id.
[9] Stephanie A. Scharf & Roberta A. Liebenberg, Am. Bar Ass’n, First Chairs at Trial: More Women Need Seats at the Table 14-15 (2015), available at
[10] Claypole, at 10.

Wednesday, December 16, 2015

U.S. Supreme Court Enforces Class Action Arbitration Waiver In DIRECTV's Adhesion Contract

The U.S. Supreme Court, on December 14, 2015, ruled, 6 to 3, that DIRECTV customers in California who were allegedly illegally charged hefty “early termination fees” of up to around $500 can neither file their individual claim with a court nor join together to sue the company in court. The Supreme Court ordered that each consumer must have their respective complaint adjudicated through a private arbitration system established by DIRECTV (now owned by AT&T). See DirecTV, Inc. v. Imburgia, et al, available at: . 

         The majority refused to give the customer the benefit of the doubt when DIRECTV itself drafted and provided the ambiguous contractual languages in its 2007 version of the form service contract in dispute. Section 9 of this 2007 form agreement provides that (1) any claims raised by DIRECTV or consumers will be resolved only by binding arbitration; (2) no class-based arbitration is permitted; (3) the entire arbitration provision (i.e., arbitration only and no class-based claims) is unenforceable if “the law of your state” makes the class arbitration waiver unenforceable. Section 10 states that Section 9 shall be governed by the Federal Arbitration Act (FAA). The majority deferred to California Court of Appeal’s interpretation and concluded “the law of your state” refers to “the law of California.” The only issue in this case, thus, was whether California state law made the class arbitration waiver unenforceable so as to make the entire arbitration provision unenforceable.

The majority held that current California state law could not make DIRECTV’s clause of class arbitration waiver unenforceable even though in 2007—when DIRECTV drafted the form agreement—California’s Supreme Court, in Discover Bank v. Superior Court, 36 Cal. 4th 148, 162-163 (2005), had held class arbitration waiver clauses under such circumstances unconscionable and unenforceable. In other words, when DIRECTV imposed this 2009 service agreement, both parties (DIRECTV and California customers who read and understood the agreement) would have had to assume if they knew California law that the class arbitration waiver would be unenforceable in California, which would have made the entire arbitration provision unenforceable under the terms of the agreement. The majority acknowledged that such assumption was likely to exist.

 The majority, however, held “the law of your state” should be presumed to be the current “valid state law.” Given the Supreme Court, in 2011, held that Discover Bank was pre-empted by the FAA (in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 352 (2011)), Discover Bank is not “valid state law.” The majority held that California courts discriminated against arbitration—violating the FAA’s policy that favors arbitration. Therefore, the majority concluded California Court of Appeal’s decision interpreting DIRECTV’s 2009 form service agreement was pre-empted by the FAA and individual arbitration is required.

Justices Ginsburg and Sotomayor dissented, as did Justice Thomas. Justice Thomas (surprisingly) opined that the FAA does not require state courts to order arbitration, stating that it does not apply to proceedings in state courts.

Justice Ginsburg articulated at least four errors in the majority’s opinion. 

First, the majority misread the FAA (enacted in 1925 to resolve disputes between merchants with equal bargaining powers), depriving consumers of effective relief against powerful economic entities, which have created their contracts with consumers and employees containing no-class arbitration clauses. Consumers and most employees, unlike merchants with equal bargaining powers, lack the ability to change the terms of consumer adhesion contracts or employment agreements so that their effective access to justice would be safeguarded.

Second, the majority unreasonably expanded the FAA’s pre-emption scope. The FAA preempts state laws only to the extent that state laws conflict with “the contracting parties’ intent.” For example, the contracting parties in 2009 expected Discover Bank to be valid – their 2009 intent should not be gauged in light of the 2011 Concepcion decision.

Third, Section 1751 of California’s Consumer Legal Remedies Act (CLRA), which the Plaintiffs relied upon to prosecute DIRECTV’s alleged violations, also renders class action waivers invalid, and Section 1751 remains “valid California state law.” Therefore, the majority erred in ignoring it.

Fourth, the majority’s decision contravenes international standards making arbitration clauses in adhesion contracts unenforceable. For example, Justice Ginsberg points out that the European Union bars enforcement of one-party-dictated mandatory consumer arbitration agreements because consumers cannot agree to arbitration that would effectively deprive them of the ability to enforce their rights.

Bryan Schwartz Law has had extensive experience fighting for employees who have no other choices but to accept a mandatory arbitration clause to get a job. We agree with the Ginsburg dissent that “arbitration is a matter of consent, not coercion” and believe the majority’s decision empowers the powerful economic enterprises but deprives the powerless, like workers and consumers, of their ability to protect their rights effectively.

Contact Bryan SchwartzLaw to learn how an arbitration agreement may affect your rights.

Tuesday, December 8, 2015

Bryan Schwartz Law's Principal Publishes Photography Book Highlighting Jewish Diversity

After 16 1/2 years of dedication to the project, Bryan Schwartz Law's principal has published Scattered Among the Nationsa book of photographs and stories of the world's most isolated Jewish communities. The coffee table book highlights sixteen diverse Jewish communities in Africa, Asia, Latin America, the Former Soviet Union, and beyond.

"My work every day as a civil rights lawyer is driven by the same passion for diversity, and my fascination with the workings of our multicultural planet, that have inspired this project," said Schwartz. "I am humbled and delighted to see it come to fruition, with such a beautiful product, after all of these years."

The publisher's blog post is at

The first review of the book is here.

Friday, November 13, 2015

Class Actions Appear Poised to Survive to Fight Another Day at High Court

At least five justices of the U.S. Supreme Court suggested at Tuesday’s oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, that they would not impose further restrictions on class action litigation in that case.

The case involves pork-processing workers seeking overtime pay under the Fair Labor Standards Act (FLSA) for time spent donning and doffing protective gear beyond 40 hours per week, time for which Tyson Foods also failed to keep FLSA-mandated records. More than 3,300 former and current employees who held 400 different jobs on the plant floor were certified as a class in the trial court in Iowa. That decision relied on statistical modeling by the employees’ expert showing that, despite some differences in the protective gear required for the various jobs, most employees took between 17 and 22 minutes donning and doffing. The case went to trial and a jury awarded the class a verdict worth approximately $5.8 million.

Tyson unsuccessfully appealed the class certification decision to the U.S. Court of Appeals for the Eight Circuit. At the Supreme Court, Tyson contended, first, that the statistical models could not sufficiently account for the different amounts of donning-and-doffing time spent by employees with different job duties and, second, that the certified class contained hundreds of members who had not worked more than 40 hours in a week.

For groups of employees or consumers who suffer injuries which are comparatively small but widespread, class actions are an essential tool to vindicate individual rights and ensure large corporations comply with existing law. Because the costs of bringing individual lawsuits may be prohibitive, class actions level the playing field for employees and consumers.

The Roberts Court showed its hostility toward class actions in two infamous 2011 decisions penned by Justice Scalia and reflecting a now-familiar 5-4 split along ideological lines: AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, and Wal-Mart Stores Inc. v. Dukes (2011) 131 S. Ct. 2541. In the latter case, Justice Scalia decried class actions which rely on the use of statistics to calculate and apportion damages as “Trial by Formula” and reversed the lower courts’ certification of a class of female Wal-Mart employees who alleged sex discrimination. Two years later, in Comcast Corp. v. Behrend (2013) 133 S. Ct. 1426, Justice Scalia–writing for the same 5-4 majority–again reversed the lower courts’ class certification decision (in a case challenging the cable company’s anticompetitive practices) on grounds that the consumers’ statistical model did not sufficiently support the alleged damages suffered across the proposed class.

A recent investigation and an editorial in The New York Times (articles available here, here, here, and here) documented and discussed the push by credit card companies and other large corporations to weaken class actions through class-action bans in consumer and employment contracts. As noted in the Times, Chief Justice John Roberts advocated in favor of class-action bans in consumer contracts as a private lawyer for Discover Bank before voting to uphold them in AT&T Mobility LLC v. Concepcion and American Express v. Italian Colors (2013) 133 S. Ct. 2304. The latter was a case in which the Supreme Court held that, even if an arbitration clause with a class waiver has the effect of preventing meaningful relief, it must generally still be upheld – severely undermining the enforcement of numerous statutes designed to protect the public from corporate abuses.

Thus, consumer and employee advocates were rightfully concerned when the Court granted certiorari in Tyson Foods. However, at oral argument, Tyson Foods’ advocate faced sharp questioning from several Justices, including Justice Kennedy (who had joined the majority in the three above-described class cases). Multiple Justices took issue with the fact that Tyson Foods was essentially asking the Court to resolve in their favor an avoidable problem of its own making: at trial, Tyson Foods opposed the plaintiffs’ efforts to bifurcate the trial, which would have allowed for a determination of the hours worked by each employee after the jury awarded aggregate damages. Justice Kennedy told counsel for Tyson: “you suggest in your brief that uninjured plaintiffs are included in aggregate damages, but you were the one that objected to the bifurcated trial.” Similarly, Justice Kagan stated: “it really was your decision not to have a bifurcated proceeding, where it would have been clear–it would have been proved separately in a highly ministerial way which employees worked over 40 hours.” Several Justices further noted that the trial court would address such concerns when apportioning the jury award on remand.

As to Tyson’s objection to the statistical model which supported class certification, five Justices appeared to agree that the question raised did not implicate Federal Rule of Civil Procedure 23 (governing class actions); instead, that question could be resolved under Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680, an old FLSA case. That case held that where an employer fails to keep adequate records (as the FLSA requires), employees need not prove the exact hours worked and are entitled to a just and reasonable inference as to those hours. Put simply, an employer who fails to keep adequate time records as required by law cannot then use the absence of those records as grounds to escape liability for minimum wages or overtime premiums. Here, Tyson had not kept records of the time employees spent donning and doffing protective gear, and thus the employees were entitled to use statistical models based on video footage at the plant to determine the average time spent on those activities. Thus, Mt. Clemens gives the Court an opportunity to uphold the class determination based on existing substantive law rather than looking to Rule 23’s procedures. Justice Kennedy did not hold back in showing his cards, telling Tyson’s counsel: “it seems to me Justice Kagan is precisely right. You said, well, I want to start first with class action. She said, no, no. The point is we start with Mt. Clemens. That’s the substantive law for FLSA.”

Although predicting the outcome of Supreme Court decisions based on the Justices’ questions at oral argument is often a futile exercise, consumer and employee advocates were cautiously optimistic after argument on Tuesday. Reinforcing the Mt. Clemens precedent would be critical for workers seeking to prove the hours they worked when an employer has misclassified employees as exempt from overtime, kept imprecise records, or required off-the-clock work. However, despite what may turn out to be a rare victory before the Roberts Court for those who protect workers’ and consumers’ rights, the warning signs for the imposition of further restrictions on class litigation were apparent in the questions asked by several Justices, notably Justice Kennedy.

He probed both the advocates for the plaintiffs and the government (which intervened on behalf of plaintiffs in the case) as to whether the case would be “much closer” if decided solely under Rule 23, without the Mt. Clemens inference, asking counsel for plaintiffs: “do you concede that there is a strong possibility you might not be–have this class certified under section–under Rule 23, absent Mt. Clemens?” In doing so he signaled that, even if he sides with the Tyson Foods plaintiffs, he has no plans to abandon the majority from the AT&T Mobility, Wal-Mart Stores, Comcast, and Italian Colors cases.

Chief Justice Roberts expressed skepticism as to whether Mt. Clemens could even resolve the class certification question, arguing that Mt. Clemens addressed the amount of damages owed to a worker shown to have worked more than 40 hours in week, not a situation where the records failed to establish the employer’s liability for overtime in the first instance. Both Justices Scalia and Alito expressed their grave concern–as did Tyson’s counsel–that some of the class members might have worked less than 40 hours, notwithstanding that such concerns could be addressed by the trial court on remand, as discussed above.

In other words, employees and consumers may win in Tyson Foods, but the current Roberts Court majority at oral argument offered little assurance that they will preserve the safety of the public policy interests protected by consumer and employment class actions going forward

Friday, October 2, 2015

Ninth Circuit Preserves California Employees’ Rights under PAGA

On Monday, the U.S. Court of Appeals for the Ninth Circuit protected the right of employees in California to bring representative actions under the Private Attorneys General Act of 2004, commonly known as PAGA. That decision, Sakkab v. Luxottica Retail North America, No. 13-55184 (9th Cir. Sept. 28, 2015), means that an employee who has signed a mandatory arbitration agreement which attempts to bar representative claims against the employer may nonetheless bring a representative claim under PAGA.

PAGA emboldens aggrieved employees to step into the shoes of the California Labor Workforce Development Agency to enforce California’s Labor Code. Penalties recovered from employers who have violated the Labor Code are then divided between the State and the aggrieved employees.

As discussed in previous blog posts, employees’ right to bring representative actions suffered a significant blow when the U.S. Supreme Court held in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), that the Federal Arbitration Act preempted California’s law (and those of other states) which invalidated consumer contracts that prohibited representative actions. However, the California Supreme Court subsequently ruled that, notwithstanding Concepcion, PAGA waivers are unenforceable as a matter of state law in Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348. In that case, the California Supreme Court reasoned that the state legislature chiefly enacted PAGA to ensure compliance with the state’s labor code through qui tam actions, not merely to assert the individual rights of private litigants. On that basis, the court in Iskanian concluded that the Federal Arbitration Act – which concerns bargaining between private parties – did not preempt PAGA.

Following Iskanian, employers in Sakkab and other cases nonetheless argued that the Federal Arbitration Act preempts the unenforceability of PAGA waivers under California law. On two occasions this year, the U.S. Supreme Court has declined to consider that argument: first with respect to Iskanian and second as to Bridgestone Retail Operations, LLC v. Brown, 2015 WL 86028, No. 14-790.

That argument failed again this week before the Ninth Circuit, which emphasized the public benefits of representative PAGA actions in concluding that the Federal Arbitration Act does not preempt California’s ability to protect employees through such actions. In that regard, the Ninth Circuit agreed with the California Supreme Court in Iskanian that enforcing an employee’s waiver of the right to bring a representative PAGA action allows an employer to dodge responsibility for its own violations of the law. The Ninth Circuit further stressed PAGA’s central role in enforcing California’s labor laws, stating that “[t]he explicit purpose of the rule barring enforcement of agreements to waive representative PAGA claims is to preserve the deterrence scheme the legislature judged to be optimal.” Sakkab at 28.

Bryan Schwartz Law applauds the Ninth Circuit for trusting the state legislature’s judgment that it could significantly reduce violations of the California Labor Code by allowing employees to vindicate the state’s interest in strong labor protections.