The Briefing Focused On A "Blow-Up" Provision, But The Court Focused On An Unenforceable Waiver Of PAGA Claims And Lack Of Severability.
"Six-year-old Gregorio Drozco III does what a lot of people do in a Seattle, Washington, alley when he blows a bubble, preparatory to wadding up his gum and sticking it to a wall next to the Market Theatre that has become a kitschy tourist attraction." Carol M. Highsmith, photographer. Library of Congress.
The employer-employee contract in Kec v Superior Court of Orange County, G058119 (4/3 7/9/20) (Ikola, Thompson, Goethals), contained a waiver of class and other representative actions, broad enough to cover a PAGA claim. The arbitration agreement also provided that the waiver was not modifiable or severable, and that if the representative waiver was found to be invalid, "the Agreement becomes null and void as to the employee(s) who are parties to that particular dispute" -- a so-called "'blow-up' provision." The employee plaintiff brought individual, class, and PAGA claims against defendants. Since Iskanian v. CLS Transportation Los Angeles, LLC, an employee's right to bring a PAGA action is unwaivable.
The trial court reasoned it had not been called upon to rule on the enforceability of the representative waiver, and thus the blow-up provision had not been triggered, and in any case, the blow-up provision would only apply to the attempted waiver of the PAGA claim, not to the arbitrability of the plaintiff's claims under the Labor Code. Hence, the trial judge enforced the arbitration provision as too plaintiff's Labor Code claims.
The Court of Appeal reached a different conclusion, without ruling on the validity of the blow-up provision. Instead, the Court held that the representative waiver, which would have included a PAGA action, was void, and the defendants could not selectively enforce the arbitration agreement, which expressly provided for a lack of severability in the event that the representative waiver was found to be invalid. In other words, the invalid PAGA waiver infected the entire arbitration provision.
To reach this conclusion, the Court had to address the defendant employer's argument that the representative waiver was for its benefit, and therefore, the defendant had the right to waive the provision that was for its benefit. Grasping Justice Ikola's reasoning requires wrapping one's head around a double or triple-negative, here, the employer's ineffective waiver of its right to enforce the employee's representative waiver .
A waiver must be knowing an intentional at the time that it is exercised. Here, because the employee brought its claim after Iskanian was decided, the employer's waiver of its right to enforce the employee's waiver of his right to bring a PAGA action was not valid. Post-Iskanian, the employer had no such right to enforce the employee's waiver of a PAGA claim. Maybe the employer would have had such a right to enforce the provision that was for its own benefit, when the law was still uncertain, at the time it entered into the employment contract, but not under the circumstances (which included the post-Iskanian state of the law) at the time the employee sued.
A bit tricky?
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