On January 11, 2015 I posted a comment about how some federal district courts in California were rejecting the part of Iskanian v. CLS Transportation (2014) 59 Cal.4th 348 in which Justice Goodwin Liu held that arbitration agreements that prevent workers from bringing representative claims under California’s Private 
Attorneys General Act, or PAGA, are unenforceable. As of last count, at least six courts had reached that unfortunate conclusion.
Recently, two judges in the Northern District of California have bucked this tide and sided with Justice Liu. In Hernandez v. DMSI Staffing, LLC, 2015 U.S. Dist. LEXIS 12824 (February 3, 2015), Judge Edward Chen correctly held that PAGA waivers are unenforceable. According to Judge Chen, allowing such waivers would frustrate PAGA’s objectives because it would bar representative claims that are brought to protect the rights of employees under the California Labor Code.
Furthermore, as Judge Chen writes, the holding in Iskanian does not conflict with the United States Supreme Court decision in AT&T Mobility v. Concepcion. PAGA claims are fundamentally different from class actions. For this reason, unlike the Gentry rule (prohibiting class action waivers in employment cases under certain circumstances), the Iskanian rule barring waivers of PAGA claims does not undermine the fundamental attributes of arbitration. Moreover, the Federal Arbitration Act (FAA) was never intended to govern disputes between the government and private employers. Yet that is exactly what a PAGA claim is.
Judge Chen ends his opinion by making two very important points. First, state laws dealing with local concerns (also known as “police powers”) should not be preempted unless Congress clearly intended to do so. Laws such as PAGA that apply to the workplace are police powers. There is no evidence that Congress intended the FAA to preempt such laws. Therefore, courts should resist the temptation to reach that conclusion.
Second, the stakes here are very high. There is currently an open question as to whether PAGA claims must be representative, or whether they can be brought on an individual basis. See, e.g., Ortiz v. Hobby Lobby Stores, 2014 U.S. Dist. LEXIS 140552 (October 1, 2014). But if PAGA claims can only be brought on a representative basis, and if employers can require workers to waive their rights to bring PAGA claims on a representative basis, then employers can effectively bar workers from bringing PAGA claims at all. (This very point was raised by Justice Ming Chin in his concurrence in Iskanian.)
This type of result would allow employers to turn forum selection clauses into what amounts to an outright waiver of statutory remedies. The United States Supreme Court rejected that type of result in a 2002 case called EEOC v. Waffle House, Inc., 534 U.S. 279, 289. Sadly, it is unlikely that that Court would do so today.
In Zenelaj v. Handybook, Inc., 2015 U.S. Dist. LEXIS 26068 (March 3, 2015), Judge Thelton Henderson considered the holding in Hernandez and compared it to the holdings in other district court cases reaching the opposite result. He then chose to follow the “well-reasoned decision in Hernandez.”
The debate over this issue will continue to percolate until the Ninth Circuit resolves it. But at least for now there are strong opinions from Judge Chen and Judge Henderson that get it right.