Court Refuses to Enforce Class Arbitration Waiver -- Franco v. Athens Disposal Company, Inc.

In Franco v. Athens Disposal Company, Inc. the Court refused to enforce a class action waiver in an arbitration agreement which the employer was attempting to use to thwart class claims for missed meal periods.  The case vividly illustrates how attempting to enforce such an agreement will likely result in an early ruling on the desirability of class certification.   

This is because the California Supreme Court's 2007 decision in Gentry v. Superior Court generally disapproved of arbitration agreements that purport to prohibit class-wide arbitration. The Court's rationale was that the procedural obstacles to enforcing small claims individually would typically be prohibitive -- so that waiving the class remedy would have the same effect as an "exculpatory" waiver of substantive rights.  It thus left the door open just a sliver by allowing employers to try to prove a class-wide remedy is not necessary to ensure effective enforcement of the statutory rights of employees.

At such an early stage, however, the deck is stacked against the employer.  And trying to meet the standard set by Gentry may amount to a trap that can prejudice any later attempt to avoid class certification.    For example, just in the context of denying the motion to compel arbitration the Franco court concluded that: "Here, class treatment would be more practical than individual actions, regardless of whether the claims are adjudicated through arbitration or in the trial court."

When deciding to enforce an arbitration agreement employers will have to think carefully if precipitating such a ruling at the outset of the case is ultimately in their best interests.    


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