November 20, 2015

Et tu, Ninth Circuit?

By Deborah J. La Fetra Senior Attorney

The California Supreme Court is widely known for its hostility to arbitration contracts, despite the supposedly controlling Federal Arbitration Act that requires such contracts to be enforced as any other contract would be.  Last year, in Iskanian v. CLS Transportation Los Angeles, the California Supreme Court held that employees who act as “representatives” to assert claims under the Private Attorney General Act (PAGA) are acting as “deputies” on behalf of the state and therefore cannot exercise their freedom to contract for arbitral resolution of employment disputes.  As we explained at the time, this was an invitation to mischief, because lots of statutes permit citizen enforcement of statutes.

In general, federal district courts declined to follow the California Supreme Court’s lead, holding that PAGA claims were every bit as arbitrable as other employment disputes based on alleged statutory violations.  In Sakkab v. Luxottica Retail North America, however, the Ninth Circuit Court of Appeals cast its lot with the California Supreme Court, holding that PAGA claims must be heard in court, despite an employee’s willing agreement to arbitrate them.  (In this case, Sakkab had 30 days to opt-out of the arbitration contract and declined to do so).  Luxottica–the parent company of Lenscrafters, the employer in this case–filed a petition for rehearing en banc.  PLF today filed an amicus brief, joined by the National Federation of Independent Business Small Business Legal Center, urging the court to grant the petition and reverse the panel decision, restoring the freedom of contract at least to the federal courts in California.

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