Class action waivers remain a complex and evolving area of law in California. While the state has traditionally been skeptical of such provisions, particularly in employment and consumer contracts, federal law, led by the Federal Arbitration Act (FAA), generally upholds their enforceability. In this article, our California class action litigation attorney explains what you need to know about the current legal landscape surrounding class action waivers in California.
What is a Class Action Waiver?
A class action waiver is a clause within a contract—most often in employment agreements or consumer service terms—that prevents an individual from joining or initiating a class action lawsuit against the other party, typically a business or employer. Instead, the individual agrees to resolve any disputes through individual arbitration or another specified legal process. These waivers are commonly embedded in arbitration agreements.
Federal Law Favors Arbitration (and Class Action Waivers)
The Federal Arbitration Act (FAA) plays a central role in determining the enforceability of arbitration agreements and class action waivers. The FAA reflects a strong national policy in favor of enforcing arbitration clauses, including those that prohibit class-wide litigation.
In AT&T Mobility LLC v. Concepcion (2011), the U.S. Supreme Court ruled that the FAA preempts California’s Discover Bank rule, which had previously deemed certain class action waivers in consumer contracts as unconscionable. The decision confirmed that California cannot invalidate class action waivers solely based on public policy grounds if they conflict with the FAA.
Class Action Waivers Still Face Some Limits in California
Despite federal preemption, California continues to impose certain restrictions on the enforceability of class action waivers in specific contexts:
- California Arbitration Act (CAA): When the FAA does not apply, California courts may look to the CAA. Under this law, class action waivers may be deemed unenforceable if they are found to be unconscionable or against public policy.
- The Gentry Test (Employment Cases): In Gentry v. Superior Court, the California Supreme Court laid out a multifactor test to determine whether class action waivers in employment agreements should be enforced. The court may consider factors such as the potential recovery amount, the risk of retaliation, and the ability of individual employees to pursue claims on their own.
The Bottom Line
Under federal law, class action waivers—particularly those tied to arbitration clauses—are generally enforceable in California. However, California state courts retain the ability to scrutinize these waivers in certain situations, especially when the FAA does not apply or where public policy concerns are involved. Anyone facing a dispute involving a class action waiver should seek legal guidance tailored to their circumstances.
Speak With a California Class Action Litigation Attorney Today
At Saltz Mongeluzzi Bendesky P.C., our California class action attorneys have the experience and insight to help you navigate complex legal issues involving class action waivers and arbitration. Contact us today for a free, confidential case evaluation. We proudly serve clients across California, including Los Angeles, San Diego, San Francisco, San Jose, Sacramento, Oakland, Fresno, and Bakersfield.