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Gentry - New attack on class action waivers
August 30, 2007 by Ross Runkel at LawMemo

Shifting away from "unconscionability" doctrine, the California Supreme Court relied on "public policy" to say that some class arbitration waivers will be illegal.

Gentry v. Superior Court [Circuit City] (California 08/30/2007) (4-3)

Gentry brought a class action suit claiming that the employer had misclassified salaried customer service managers as exempt from the overtime provisions of the California Labor Code. Because Gentry had signed an agreement to arbitrate, and the agreement contained a class action waiver, the trial court ordered arbitration on an individual basis. The California Court of Appeal affirmed; the California Supreme Court (4-3) reversed.

The California Supreme Court held that in some cases a class arbitration action waiver may be contrary to public policy.

Rather than relying on the unconscionability doctrine, the court focused on the fact that Gentry's claim dealt with the "unwaivable" statutory right to receive overtime pay.

The court concluded that

"under some circumstances such a provision would lead to a de facto waiver and would impermissibly interfere with employees' ability to vindicate unwaivable rights and to enforce the overtime laws."

"[W]hen it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider the factors discussed above: the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration. If it concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer’s violations, it must invalidate the class arbitration waiver to ensure that these employees can 'vindicate [their] unwaivable rights in an arbitration forum.'" The court remanded for findings on these issues.

[For the court's analysis of unconscionability, go here.]

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