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The California Supreme Court extended its recognition of consumers’ right to arbitrate class action claims to include employee class action arbitration. In a split, 4-3 decision Aug. 30, the state’s high court held employer-imposed bans on use of class action to arbitrate wage and overtime disputes cannot be enforced. The ruling reinstates a claim by a Circuit City Stores, Inc. employee in southern California who alleged he was illegally misclassified as a manager “exempt” from overtime pay, when in fact he and others were non-exempt workers entitled to overtime, Gentry v. Sup. Ct. of Los Angeles County, S141502. The case centered on the legality of class arbitration waivers in employment arbitration agreements. “We conclude that at least in some cases, the prohibition of class-wide relief would undermine the vindication of the employees’ unwaivable statutory rights and would pose a serious obstacle to the enforcement of the state’s overtime laws,” wrote Justice Carlos Moreno. Justice Marvin Baxter and two others dissented stating they could not join “the majority’s continuing effort to limit and restrict the terms of private arbitration agreements, which enjoy special protection under both state and federal law.” The Circuit City agreement reduced the statute of limitation to one year from the four years allowed under state law, limited remedies to one year of back pay and limited punitive damages to $5,000. Moreno said it would take a legally sophisticated employee to understand in the nine-page, single-spaced arbitration agreement that the rules were “considerably less favorable to an employee than those operating in the judicial forum.” In 2005, the court found mandatory waiver of class action rights in consumer arbitration agreements to be unconscionable, Discover Bank v. Sup. Ct. of Los Angeles, 36 Cal. 4th 148 (2005). The latest decision clarifies Discover Bank and extends it to the employment context.

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