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Private AG Law Versus Mandatory Arbitration in California

Monday, June, 17, 2013


Private AG Law Versus Mandatory Arbitration in California


A California appellate court ruling is getting attention in California.  The debate has been raging between mandatory arbitration and the California Private Attorney General Act, and the recent court ruling makes the situation even more interesting. 


The appellate court found that the mandatory arbitration clause listed in an employment agreement does not bar a suit under the current private AG law since private agreements cannot take way state’s rights.  The tension surrounding this issue is being highlighted by a current case before the high court in California.  The current case considers whether employers are able to avoid litigation through mandatory arbitration clauses. 


Up until this point, employers in California have been adapting the mandatory arbitration clauses to keep employees from litigation, drawn from the Supreme Court ruling in AT&T Mobility V. Concepcion from 2011.  In this case, it was held that the Federal Arbitration Act preempted state contract law.  The state contract law regarded class-action waivers in arbitration agreements unenforceable.  Currently, courts seem to be torn about whether that Supreme Court ruling has the effect of precluding private Attorney General actions brought forth by employees who had signed mandatory arbitration agreements.  The same ruling has also been used by companies attempting to enforce arbitration clauses with consumers, although it has been increasingly explored with employees. 


The outcome of the current case could have important implications for thousands of California employees included in contracts with mandatory arbitration clauses.  The final decision could give employees some idea of what to expect if they were to have a case. 


Currently, the most attention is surrounding employees who bring class action lawsuits against employers, and the California decision could have important ramifications for how other courts around the country interpret the Supreme Court case, so all eyes are on California for the time being.