FAA Does Not Permit Claswide Arbitration Unless Parties Agree

Well, the U.S. Supreme Court may have made employment arbitration agreements really popular, until Congress decides to ban them.

The court held in a non-employment case, STOLT-NIELSEN S. A. ET AL. v. ANIMALFEEDS INTERNATIONAL CORP., that parties cannot force the arbitration of class actions unless the arbitration agreement permits it.

What if the agreement is silent about class arbitration? The court said silence does not mean consent.

In California, though, it is illegal to prohibit class action arbitration. So, what if the agreement is silent? Does that now mean you're prohibiting class arbitration because of the silence? If you argue that, under the Federal Arbitration Act, a silent agreement essentially prohibits class arbitration, where does that leave the arbitration agreement under California law?

Will the Federal Arbitration Act trump the California Supreme Court's decision in Gentry v. Superior Court (opinion here; post here), in which the California high court held that classwide arbitration waivers are illegal / unconscionable?

I know, so many questions. My opinion is: I think so. But I have never really understood how California arbitration agreement law has escaped the FAA anyway.

The U.S. Supreme Court's decision is here. Stay tuned!


Ninth Circuit Issues Walmart Class Certification Opinion

Dukes v. Walmart is the massive class action filed on behalf of some 1.5 million current and former female employees. Back in 2007, we posted about this case here and here.

An en banc panel of the Ninth Circuit just issued a "rather lengthy" opinion (read: super-long). It's a scholarly exposition of class action certification law. It makes a law review article read like a comic book.

The court's intention is to clarify the standards for class certification in the Ninth Circuit for cases brought or removed to federal district court. Federal court class action practitioners are going to want to read this opinion again and again. They're going to have to, because the majority's opinion is a bit, well, windy.

I will spare you the details because you can read as much of the opinion as you can stand. To sum up, the court is permitting the certification of a class of hundreds of thousands of current workers claiming sex discrimination. The court, however, remanded the case to the district court regarding whether to allow a separate class of former employees, and whether punitive damages makes the case inappropriate for certification.

The case is Dukes v. Walmart and the opinion is here.

California Supreme Court Continues to Love Arbitration! (Not)

In its latest installment of "let's silently kill mandatory arbitration," the California Supreme Court (by Justice Moreno, writing for a 4-3 majority), decided that courts may vacate arbitration awards in FEHA or other statute-based claims merely when the arbitrator makes a legal error that results in a ruling in favor of the employer without a "hearing on the merits."

Will arbitrators ever grant motions for summary judgment now that a court will review the decision for "legal error"? They'll get right on that. Here's the money quote:
We therefore hold that when, as here, an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award. Stated in other terms, construing the [California Arbitration Act] in light of the Legislature’s intent that employees be able to enforce their right to be free of unlawful discrimination under FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory arbitration agreement from obtaining a hearing on the merits of a claim based on such right has exceeded his or her powers within the meaning of Code of Civil Procedure section 1286.2, subdivision (a)(4), and the arbitrator’s award may properly be vacated. (See Armendariz, supra, 24 Cal.4th at pp. 106-107.)
To emphasize: this holding does not authorize court review for an arbitrator's mere legal errors when a "hearing on the merits" has occurred. In this case, the arbitrator decided the claim was barred by the statute of limitations. That, of course, is not a "merits" argument.

The case is Pearson Dental Supplies v. Superior Court (Turcios) and the opinion is here.

US DOL Clarifies Unpaid Internships

The US Department of Labor issued new guidance regarding unpaid internships (here). The DLSE just got done with their opinion letter (posted here), and here come the feds with a fact sheet of their own. Coincidence? I think NOT! Scuse me, I need to dry clean my tinfoil hat.

California Fair Employment and Housing Commission to Issue Pregnancy Discrimination Regulations

So, the California FEHC, which enforces the Fair Employment and Housing Act (FEHA) is fixing to revise its pregnancy disability leave regulations. The webpage devoted to these efforts, including a link to the first draft of the regulations is here. If history is a guide, there will be a number of hearings and revisions before final regulations are promulgated. We will have a detailed article on these proposed regulations in the coming weeks. However, one highlight I noticed right away is that the new regulations will explain in more detail how pregnancy disability dovetails with other disabilities regarding "reasonable accommodation obligations" (over and above the separate pregnancy disability leave requirement).

CA Division of Labor Standards Issues Opinion Letter re Internships

Summer's here and the time is right for hiring free labor - er educational interns, that is! The Division of Labor Standards Enforcement issued an opinion letter, here, explaining when an internship / training period may be unpaid. The opinion letter arose in the context of a non-profit's training program. But the agency goes into detail regarding the factors it considers relevant, etc.

El Torito Managers Denied Class Certification

The courts are not requiring class certification in class actions attacking the executive exemption. The main point continues to be that the trial court's decision is entitled to lots of deference. If the trial court's factual findings are supported by "substantial evidence" is does not matter that there is conflicting evidence. The appellate court then looks to whether the trial court applied the proper legal standard. The bottom line is that the trial court has a lot of power in class certification matters.

In this case, involving restaurant managers, the trial court properly found evidence that a class of managers, even broken into sub-classes, was not amenable to common class treatment. Therefore, the court of appeal upheld the trial court's denial of certification. The court sets forth a long discussion regarding what the trial court found to be important on the certification issue....

The plaintiff arguments that classifying everyone as exempt proves commonality, and that chain restaurant managers don't have enough discretion to create individual issues precluding class certification, continue to be losers.

So lawyers defending restaurants in wage and hour matters, take note.

Arenas v. El Torito Restaurants, Inc. et al. and the opinion is here.