Title: Iskanian v. CLS Transportation
Citation: N/A
Docket Number: S204032A
State: California
Issuer: California Supreme Court
Date: June 26, 2014

Filed 6/23/14   (Reposted 6/26/14 to augment listing of counsel who argued in Supreme Ct.; no change to opn. text) 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
ARSHAVIR ISKANIAN, 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S204032 
 
v. 
) 
 
 
) 
Ct.App. 2/2 B235158 
CLS TRANSPORTATION 
) 
LOS ANGELES, LLC, 
) 
 
) 
Los Angeles County 
 
Defendant and Respondent. 
) 
Super. Ct. No. BC356521 
 
____________________________________) 
 
In this case, we again address whether the Federal Arbitration Act (FAA) 
preempts a state law rule that restricts enforcement of terms in arbitration 
agreements.  Here, an employee seeks to bring a class action lawsuit on behalf of 
himself and similarly situated employees for his employer‘s alleged failure to 
compensate its employees for, among other things, overtime and meal and rest 
periods.  The employee had entered into an arbitration agreement that waived the 
right to class proceedings.  The question is whether a state‘s refusal to enforce 
such a waiver on grounds of public policy or unconscionability is preempted by 
the FAA.  We conclude that it is and that our holding to the contrary in Gentry v. 
Superior Court (2007) 42 Cal.4th 443 (Gentry) has been abrogated by recent 
United States Supreme Court precedent.  We further reject the arguments that the 
class action waiver at issue here is unlawful under the National Labor Relations 
 
2 
Act and that the employer in this case waived its right to arbitrate by withdrawing 
its motion to compel arbitration after Gentry. 
The employee also sought to bring a representative action under the Labor 
Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.).  
This statute authorizes an employee to bring an action for civil penalties on behalf 
of the state against his or her employer for Labor Code violations committed 
against the employee and fellow employees, with most of the proceeds of that 
litigation going to the state.  As explained below, we conclude that an arbitration 
agreement requiring an employee as a condition of employment to give up the 
right to bring representative PAGA actions in any forum is contrary to public 
policy.  In addition, we conclude that the FAA‘s goal of promoting arbitration as a 
means of private dispute resolution does not preclude our Legislature from 
deputizing employees to prosecute Labor Code violations on the state‘s behalf.  
Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA 
representative actions in an employment contract. 
Finally, we hold that the PAGA does not violate the principle of separation 
of powers under the California Constitution. 
I. 
Plaintiff Arshavir Iskanian worked as a driver for defendant CLS 
Transportation Los Angeles, LLC (CLS) from March 2004 to August 2005.  In 
December 2004, Iskanian signed a ―Proprietary Information and Arbitration 
Policy/Agreement‖ providing that ―any and all claims‖ arising out of his 
employment were to be submitted to binding arbitration before a neutral arbitrator.  
The arbitration agreement provided for reasonable discovery, a written award, and 
judicial review of the award; costs unique to arbitration, such as the arbitrator‘s 
fee, would be paid by CLS.  The arbitration agreement also contained a class and 
representative action waiver that said:  ―[E]xcept as otherwise required under 
 
3 
applicable law, (1) EMPLOYEE and COMPANY expressly intend and agree that 
class action and representative action procedures shall not be asserted, nor will 
they apply, in any arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE 
and COMPANY agree that each will not assert class action or representative 
action claims against the other in arbitration or otherwise; and (3) each of 
EMPLOYEE and COMPANY shall only submit their own, individual claims in 
arbitration and will not seek to represent the interests of any other person.‖ 
On August 4, 2006, Iskanian filed a class action complaint against CLS, 
alleging that it failed to pay overtime, provide meal and rest breaks, reimburse 
business expenses, provide accurate and complete wage statements, or pay final 
wages in a timely manner.  In its answer to the complaint, CLS asserted among 
other defenses that all of plaintiff‘s claims were subject to binding arbitration.  
CLS moved to compel arbitration, and in March 2007, the trial court granted 
CLS‘s motion.  Shortly after the trial court‘s order but before the Court of 
Appeal‘s decision in this matter, we decided in Gentry that class action waivers in 
employment arbitration agreements are invalid under certain circumstances.  
(Gentry, supra, 42 Cal.4th at pp. 463–464.)  The Court of Appeal issued a writ of 
mandate directing the superior court to reconsider its ruling in light of Gentry. 
On remand, CLS voluntarily withdrew its motion to compel arbitration, and 
the parties proceeded to litigate the case.  On September 15, 2008, Iskanian filed a 
consolidated first amended complaint, alleging seven causes of action for Labor 
Code violations and an unfair competition law (UCL) claim (Bus. & Prof. Code, 
§ 17200 et seq.).  Iskanian brought his claims as an individual and putative class 
representative seeking damages, and also in a representative capacity under the 
PAGA seeking civil penalties for Labor Code violations.  After conducting 
discovery, Iskanian moved to certify the class, and CLS opposed the motion.  On 
October 29, 2009, the trial court granted Iskanian‘s motion. 
 
4 
On April 27, 2011, the United States Supreme Court issued AT&T Mobility 
LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion).  
Concepcion invalidated our decision in Discover Bank v. Superior Court (2005) 
36 Cal.4th 148 (Discover Bank), which had restricted consumer class action 
waivers in arbitration agreements.  Soon after, in May 2011, CLS renewed its 
motion to compel arbitration and dismiss the class claims, arguing that 
Concepcion also invalidated Gentry.  Iskanian opposed the motion, arguing among 
other things that Gentry was still good law and, in any event, that CLS had waived 
its right to seek arbitration by withdrawing the original motion to compel 
arbitration.  The trial court ruled in favor of CLS, ordering the case into individual 
arbitration and dismissing the class claims with prejudice.  
The Court of Appeal affirmed, concluding that Concepcion invalidated 
Gentry.  The court also declined to follow a National Labor Relations Board ruling 
that class action waivers in adhesive employment contracts violate the National 
Labor Relations Act.  With respect to the PAGA claim, the court understood 
Iskanian to be arguing that the PAGA does not allow representative claims to be 
arbitrated, and it concluded that the FAA precludes states from withdrawing 
claims from arbitration and that PAGA claims must be argued individually, not in 
a representative action, according to the terms of the arbitration agreement.  
Finally, the court upheld the trial court‘s finding that CLS had not waived its right 
to compel arbitration.  We granted review. 
II.  
We first address the validity of the class action waiver at issue here and the 
viability of Gentry in light of Concepcion. 
In Discover Bank, we held that when a class arbitration waiver ―is found in 
a consumer contract of adhesion in a setting in which disputes between the 
contracting parties predictably involve small amounts of damages, and when it is 
 
5 
alleged that the party with the superior bargaining power has carried out a scheme 
to deliberately cheat large numbers of consumers out of individually small sums of 
money, then . . . the waiver becomes in practice the exemption of the party ‗from 
responsibility for [its] own fraud, or willful injury to the person or property of 
another.‘  (Civ. Code, § 1668.)  Under these circumstances, such waivers are 
unconscionable under California law and should not be enforced.‖  (Discover 
Bank, supra, 36 Cal.4th at pp. 162–163.) 
The high court in Concepcion invalidated Discover Bank and held that 
―[r]equiring the availability of classwide arbitration interferes with fundamental 
attributes of arbitration and thus creates a scheme inconsistent with the FAA.‖  
(Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1748].)  According to 
Concepcion, classwide arbitration ―sacrifices the principal advantage of arbitration 
— its informality — and makes the process slower, more costly, and more likely 
to generate procedural morass than final judgment.‖  (Id. at p. __ [131 S.Ct. at 
p. 1751].)  Class arbitration also ―greatly increases risks to defendants‖ and ―is 
poorly suited to the higher stakes of class litigation‖ because of the lack of judicial 
review, ―thus rendering arbitration unattractive‖ to defendants.  (Id. at p. __ & 
fn. 8 [131 S.Ct. at p. 1752 & fn. 8].)  The court concluded that ―[b]ecause it 
‗stands as an obstacle to the accomplishment and execution of the full purposes 
and objectives of Congress,‘ [citation], California‘s Discover Bank rule is 
preempted by the FAA.‖  (Id. at p. __ [131 S.Ct. at p. 1753].) 
In Gentry, we considered a class action waiver and an arbitration agreement 
in an employment contract.  The complaint in Gentry alleged that the defendant 
employer had systematically failed to pay overtime wages to a class of employees.  
Whereas Discover Bank concerned the application of the doctrine of 
unconscionability, Gentry focused on whether the class action waiver would 
―undermine the vindication of the employees‘ unwaivable statutory rights‖ to 
 
6 
overtime pay.  (Gentry, supra, 42 Cal.4th at p. 450.)  We concluded that a class 
action waiver may be unenforceable in some circumstances:  ―[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.‘ ‖  
(Id. at pp. 463–464.) 
Iskanian contends that Gentry survives Concepcion.  In his briefing, he 
argues:  ―The Missouri Supreme Court has interpreted Concepcion as holding that 
Discover Bank was preempted because ‗it required class arbitration even if class 
arbitration disadvantaged consumers and was unnecessary for the consumer to 
obtain a remedy.‘  (Brewer v. Missouri Title Loans (Mo. 2012) 364 S.W.3d 486, 
489, 494.)  Similarly, a recent analysis of Concepcion concludes that ‗the 
unconscionability defense in Concepcion ―stood as an obstacle,‖ for preemption 
purposes, because it was a categorical rule that applied to all consumer cases.  The 
sin of the Discover Bank rule was that it did not require the claimant to show that 
the agreement operated as an exculpatory contract on a case-specific basis.‘  
 
7 
(Gilles & Friedman, After Class: Aggregate Litigation in the Wake of AT&T 
Mobility v. Concepcion (2012) 79 U. Chi. L. Rev. 623, 651.)‖ 
Iskanian also contends:  ―Gentry, by contrast, ‗is not a categorical rule 
against class action waivers.‘  [Citation.]  Gentry explicitly disclaimed any 
categorical rule . . . .  Unlike Discover Bank, which held consumer class-action 
bans ‗generally unconscionable‘ ([Gentry, supra, 42 Cal.4th] at p. 453), Gentry 
held only that when a statutory right is unwaivable because of its ‗public 
importance,‘ id. at p. 456, banning class actions would in ‗some circumstances‘ 
‗lead to a de facto waiver and would impermissibly interfere with employees‘ 
ability to vindicate unwaivable rights and to enforce the overtime laws.‘  (Id. at 
p. 457.)‖  According to Iskanian, ―[t]he Courts of Appeal have interpreted Gentry 
to require an evidentiary showing in which a plaintiff bears the burden of 
demonstrating, based on the Gentry factors, that enforcing a class-action ban 
would result in a waiver of substantive rights.‖ 
Contrary to these contentions, however, the fact that Gentry‘s rule against 
class waiver is stated more narrowly than Discover Bank‘s rule does not save it 
from FAA preemption under Concepcion.  The high court in Concepcion made 
clear that even if a state law rule against consumer class waivers were limited to 
―class proceedings [that] are necessary to prosecute small-dollar claims that might 
otherwise slip through the legal system,‖ it would still be preempted because states 
cannot require a procedure that interferes with fundamental attributes of arbitration 
―even if it is desirable for unrelated reasons.‖  (Concepcion, supra, 563 U.S. at 
p. __ [131 S.Ct. at p. 1753]; see American Express Co. v. Italian Colors 
Restaurant (2013) 570 U.S. __, __ & fn. 5 [133 S.Ct. 2304, 2312 & fn. 5] (Italian 
Colors).)  It is thus incorrect to say that the infirmity of Discover Bank was that it 
did not require a case-specific showing that the class waiver was exculpatory.  
Concepcion holds that even if a class waiver is exculpatory in a particular case, it 
 
8 
is nonetheless preempted by the FAA.  Under the logic of Concepcion, the FAA 
preempts Gentry‘s rule against employment class waivers. 
In his briefing and at oral argument, Iskanian further argued that the Gentry 
rule or a modified Gentry rule — whereby a class waiver would be invalid if it 
meant a de facto waiver of rights and if the arbitration agreement failed to provide 
suitable alternative means for vindicating employee rights — survives Concepcion 
under our reasoning in Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 
(Sonic II).  But the Gentry rule, whether modified or not, is not analogous to the 
unconscionability rule set forth in Sonic II. 
As noted, Gentry held that the validity of a class waiver turns on whether ―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 [whether] the disallowance of the class action will likely lead to a 
less comprehensive enforcement of [labor or employment] laws for the employees 
alleged to be affected by the employer‘s violations.‖  (Gentry, supra, 42 Cal.4th at 
p. 463.)  In other words, if individual arbitration or litigation cannot be designed to 
approximate the advantages of a class proceeding, then a class waiver is invalid.  
But Concepcion held that because class proceedings interfere with fundamental 
attributes of arbitration, a class waiver is not invalid even if an individual 
proceeding would be an ineffective means to prosecute certain claims.  (See 
Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1753].) 
The Berman waiver addressed in Sonic II is different from a class waiver.  
As Sonic II explained, a Berman waiver implicates a host of statutory protections 
designed to benefit employees with wage claims against their employers.  (Sonic 
II, supra, 57 Cal.4th at pp. 1127–1130.)  One of those protections is a special 
administrative hearing (a Berman hearing) that we had held unwaivable in Sonic-
Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I).  In Sonic II, we 
 
9 
overruled Sonic I in light of Concepcion, reasoning that ―[b]ecause a Berman 
hearing causes arbitration to be substantially delayed, the unwaivability of such a 
hearing, even if desirable as a matter of contractual fairness or public policy, 
interferes with a fundamental attribute of arbitration — namely, its objective ‗ ―to 
achieve ‗streamlined proceedings and expeditious results‘ ‖ ‘ ‖ and ―is thus 
preempted by the FAA.‖  (Sonic II, supra, 57 Cal.4th at p. 1141.)  Under the logic 
of Sonic II, which mirrors the logic applied to the Gentry rule above, it is clear that 
because a Berman hearing interferes with fundamental attributes of arbitration, a 
Berman waiver is not invalid even if the unavailability of a Berman hearing would 
leave employees with ineffective means to pursue wage claims against their 
employers. 
But Sonic II went on to explain that ―[t]he fact that the FAA preempts Sonic 
I‘s rule requiring arbitration of wage disputes to be preceded by a Berman hearing 
does not mean that a court applying unconscionability analysis may not consider 
the value of benefits provided by the Berman statutes, which go well beyond the 
hearing itself.‖  (Sonic II, supra, 57 Cal.4th at p. 1149, italics added.)  The Berman 
statutes, we observed, provide for fee shifting, mandatory undertaking, and several 
other protections to assist wage claimants should the wage dispute proceed to 
litigation.  (Id. at p. 1146.)  ―Many of the Berman protections are situated no 
differently than state laws concerning attorney fee shifting, assistance of counsel, 
or other rights designed to benefit one or both parties in civil litigation.‖  (Id. at 
p. 1150; see, e.g., Lab. Code, § 1194, subd. (a) [one-way fee shifting for plaintiffs 
asserting minimum wage and overtime claims].)  The value of these protections 
does not derive from the fact that they exist in the context of a pre-arbitration 
administrative hearing.  Instead, as Sonic II made clear, the value of these 
protections may be realized in ―potentially many ways‖ through arbitration 
designed in a manner ―consistent with its fundamental attributes.‖  (Sonic II, at 
 
10 
p. 1149; see ibid. [―Our rule contemplates that arbitration, no less than an 
administrative hearing, can be designed to achieved speedy, informal, and 
affordable resolution of wage claims . . . .‖].) 
Sonic II thus established an unconscionability rule that considers whether 
arbitration is an effective dispute resolution mechanism for wage claimants 
without regard to any advantage inherent to a procedural device (a Berman 
hearing) that interferes with fundamental attributes of arbitration.  By contrast, the 
Gentry rule considers whether individual arbitration is an effective dispute 
resolution mechanism for employees by direct comparison to the advantages of a 
procedural device (a class action) that interferes with fundamental attributes of 
arbitration.  Gentry, unlike Sonic II, cannot be squared with Concepcion. 
In practice, Gentry‘s rule prohibiting class waivers if ―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‖ (Gentry, supra, 
42 Cal.4th at p. 463) regularly resulted in invalidation of class waivers, at least 
prior to Concepcion.  (See, e.g., Olvera v. El Pollo Loco, Inc. (2009) 173 
Cal.App.4th 447, 457; Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 
Cal.App.4th 154, 170–171; Franco v. Athens Disposal Co. (2009) 171 
Cal.App.4th 1277, 1298–1299; Murphy v. Check N’ Go of California, Inc. (2007) 
156 Cal.App.4th 138, 148–149; Jackson v. S.A.W. Entertainment Ltd. (N.D.Cal. 
2009) 629 F.Supp.2d 1018, 1027–1028.)  These results are unsurprising since it is 
unlikely that an individual action could be designed to approximate the inherent 
leverage that a class proceeding provides to employees with claims against a 
defendant employer.  (See Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at 
p. 1752].)  By contrast, Sonic II addressed individual wage claims, not class 
actions, and there is no reason to think that the value of Berman protections 
distinct from a Berman hearing itself cannot be achieved by designing an 
 
11 
arbitration process that is accessible, affordable, and consistent with fundamental 
attributes of arbitration.  (See Sonic II, supra, 57 Cal.4th at p. 1147 [―There are 
potentially many ways to structure arbitration, without replicating the Berman 
protections, so that it facilitates accessible, affordable resolution of wage disputes.  
We see no reason to believe that the specific elements of the Berman statutes are 
the only way to achieve this goal or that employees will be unable to pursue their 
claims effectively without initial resort to an administrative hearing as opposed to 
an adequate arbitral forum.‖].) 
In sum, Sonic II recognized that the FAA does not prevent states through 
legislative or judicial rules from addressing the problems of affordability and 
accessibility of arbitration.  But Concepcion held that the FAA does prevent states 
from mandating or promoting procedures incompatible with arbitration.  The 
Gentry rule runs afoul of this latter principle.  We thus conclude in light of 
Concepcion that the FAA preempts the Gentry rule.   
III. 
Iskanian contends that even if the FAA preempts Gentry, the class action 
waiver in this case is invalid under the National Labor Relations Act (NLRA).  
Iskanian adopts the position of the National Labor Relations Board (Board) in 
D.R. Horton Inc. & Cuda (2012) 357 NLRB No. 184 [2012 WL 36274] (Horton I) 
that the NLRA generally prohibits contracts that compel employees to waive their 
right to participate in class proceedings to resolve wage claims.  The Fifth Circuit 
recently refused to enforce that portion of the NLRB‘s opinion.  (D.R. Horton, Inc. 
v. NLRB (5th Cir. 2013) 737 F.3d 344 (Horton II).)  We consider below the 
Board‘s position and the Fifth Circuit‘s reasons for rejecting it. 
 
12 
A. 
In Horton I, the employee, Michael Cuda, a superintendent at Horton, 
claimed he had been misclassified as exempt from statutory overtime protections 
under the Fair Labor Standards Act (FLSA).  He sought to initiate a nationwide 
class arbitration of similarly situated superintendents working for Horton.  Horton 
asserted that the mutual arbitration agreement (MAA) barred arbitration of 
collective claims.  Cuda then filed an unfair labor practice charge, and the Board‘s 
general counsel issued a complaint.  The complaint alleged that Horton violated 
section 8(a)(1) of the NLRA by maintaining the MAA provision that said the 
arbitrator ― ‗may hear only Employee‘s individual claims and does not have the 
authority to fashion a proceeding as a class or collective action or to award relief 
to a group or class of employees in one arbitration proceeding.‘ ‖  (Horton I, 
supra, 357 NLRB No. 184, p. 1.)  The complaint further alleged that Horton 
violated NLRA section 8(a)(1) and (4) by maintaining arbitration agreements that 
required employees, as a condition of employment, ― ‗to submit all employment 
related disputes and claims to arbitration . . . , thus interfering with employee 
access to the [Board].‘ ‖  (Horton I, at p. 2.)  An administrative law judge agreed 
that the latter but not the former is an unfair labor practice. 
On appeal, the Board concluded that (1) the joining together of employees 
to bring a class proceeding to address wage violations is a form of concerted 
activity under section 7 of the NLRA (29 U.S.C. § 157); (2) an agreement 
compelling an employee to waive the right to engage in that activity as a condition 
of employment is an unfair labor practice under section 8 of the NLRA (id., 
§ 158); and (3) this rule is not precluded by the FAA because it is consistent with 
the FAA‘s savings clause (9 U.S.C. § 2) and because the later enacted NLRA 
prevails over the earlier enacted FAA to the extent there is a conflict. 
 
13 
The Board began its analysis with section 7 of the NLRA, which states that 
―[e]mployees shall have the right to self-organization, to form, join, or assist labor 
organizations, to bargain collectively through representatives of their own 
choosing, and to engage in other concerted activities for the purpose of collective 
bargaining or other mutual aid or protection, and shall also have the right to 
refrain from any or all of such activities except to the extent that such right may be 
affected by an agreement requiring membership in a labor organization as a 
condition of employment as authorized in section 158(a)(3) of this title.‖  (29 
U.S.C. § 157, italics added.) 
The Board commented:  ―It is well settled that ‗mutual aid or protection‘ 
includes employees‘ efforts to ‗improve terms and conditions of employment or 
otherwise improve their lot as employees through channels outside the immediate 
employee-employer relationship.‘  Eastex, Inc. v. NLRB, 437 U.S. 556, 565–566 
(1978).  The Supreme Court specifically stated in Eastex that Section 7 ‗protects 
employees from retaliation by their employer when they seek to improve their 
working conditions through resort to administrative and judicial forums.‘  Id. at 
565–566.  The same is equally true of resort to arbitration.  [¶]  The Board has 
long held, with uniform judicial approval, that the NLRA protects employees‘ 
ability to join together to pursue workplace grievances, including through 
litigation.‖  (Horton I, supra, 357 NLRB No. 184, p. 2 [2012 WL 36274 at p. *2].) 
The Board then turned to section 8(a)(1) of the NLRA, which says it is an 
unfair labor practice for an employer ―to interfere with, restrain, or coerce 
employees in the exercise of the rights guaranteed in‖ section 7.  (29 U.S.C. 
§ 158(a)(1).)  The Board found, based on the previous discussion, ―that the MAA 
expressly restricts protected activity.‖  (Horton I, supra, 357 NLRB No. 184, p. 4 
[2012 WL 36274 at p. *5].)  ―That this restriction on the exercise of Section 7 
rights is imposed in the form of an agreement between the employee and the 
 
14 
employer makes no difference.  From its earliest days, the Board, again with 
uniform judicial approval, has found unlawful employer-imposed, individual 
agreements that purport to restrict Section 7 rights––including, notably, 
agreements that employees will pursue claims against their employer only 
individually.‖  (Ibid.) 
The Board buttressed this conclusion by reviewing a statute that preceded 
the NLRA, the Norris LaGuardia Act, which among other things limited the power 
of federal courts to issue injunctions enforcing ―yellow dog‖ contracts prohibiting 
employees from joining labor unions.  (Horton I, supra, 357 NLRB No. 184, p. 5 
[2012 WL 36274 at p. *7].)  The types of activity, ―whether undertaken ‗singly or 
in concert,‘ ‖ that may not be limited by restraining orders or injunctions include 
― ‗aiding any person participating or interested in any labor dispute who . . . is 
prosecuting, any action or suit in any court of the United States or of any State.‘  
29 U.S.C. § 104(d) (emphasis added).‖  (Id. at pp. 5–6 [2012 WL 36274 at p. *7], 
fn. omitted.)  ― ‗The law has long been clear that all variations of the venerable 
―yellow dog contract‖ are invalid as a matter of law.‘  Barrow Utilities & Electric, 
308 NLRB 4, 11, fn. 5 (1992).‖  (Id. at p. 6 [2012 WL 36274 at p. *8].) 
The Board concluded its analysis by finding no conflict between the NLRA 
and the FAA.  Relying on the FAA‘s savings clause (see 9 U.S.C. § 2 [arbitration 
agreements are to be enforced ―save upon such grounds as exist at law or in equity 
for the revocation of any contract‖]), the Board explained that ―[t]he purpose of 
the FAA was to prevent courts from treating arbitration agreements less favorably 
than other private contracts.  The Supreme Court . . . has made clear that 
‗[w]herever private contracts conflict with [the] functions‘ of the National Labor 
Relations Act, ‗they obviously must yield or the Act would be reduced to a 
futility.‘  J. I. Case Co. [(1944)] 321 U.S. [332,] 337.  To find that an arbitration 
agreement must yield to the NLRA is to treat it no worse than any other private 
 
15 
contract that conflicts with Federal labor law.  The MAA would equally violate the 
NLRA if it said nothing about arbitration, but merely required employees, as a 
condition of employment, to agree to pursue any claims in court against the 
Respondent solely on an individual basis.‖  (Horton I, supra, 357 NLRB No. 184, 
p. 9 [2012 WL 36274 at p. *11].) 
The Board also invoked the principle that arbitration agreements may not 
require a party to ― ‗forgo the substantive rights afforded by the statute.‘ ‖  
(Horton I, supra, 357 NLRB No. 184, p. 9, quoting Gilmer v. Interstate/Johnson 
Lane Corp. (1991) 500 U.S. 20, 26 (Gilmer).)  The Board clarified that ―[t]he 
question presented in this case is not whether employees can effectively vindicate 
their statutory rights under the Fair Labor Standards Act in an arbitral forum.  
[Citation.]  Rather, the issue here is whether the MAA‘s categorical prohibition of 
joint, class, or collective federal, state or employment law claims in any forum 
directly violates the substantive rights vested in employees by Section 7 of the 
NLRA.‖  (Horton, supra, 357 NLRB No. 184, p. 9, fn. omitted [2012 WL 36274 
at p. *11].) 
The Board recognized a tension between its ruling and Concepcion‘s 
statements that the ―overarching purpose of the FAA . . . is to ensure the 
enforcement of arbitration agreements according to their terms so as to facilitate 
streamlined proceedings‖ and that the ―switch from bilateral to class arbitration 
sacrifices the principal advantage of arbitration—its informality.‖  (Concepcion, 
supra, 563 U.S. at pp. __, __ [131 S.Ct. at pp. 1748, 1751].)  But in the Board‘s 
view, ―the weight of this countervailing consideration was considerably greater in 
the context of [Concepcion] than it is here for several reasons.  [Concepcion] 
involved the claim that a class-action waiver in an arbitration clause of any 
contract of adhesion in the State of California was unconscionable.  Here, in 
contrast, only agreements between employers and their own employees are at 
 
16 
stake.  As the Court pointed out in [Concepcion], such contracts of adhesion in the 
retail and services industries might cover ‗tens of thousands of potential 
claimants.‘  Id. at 1752.  The average number of employees employed by a single 
employer, in contrast, is 20, and most class-wide employment litigation, like the 
case at issue here, involves only a specific subset of an employer‘s employees.  A 
class-wide arbitration is thus far less cumbersome and more akin to an individual 
arbitration proceeding along each of the dimensions considered by the Court in 
[Concepcion]—speed, cost, informality, and risk—when the class is so limited in 
size.  131 S.Ct. at 1751–1752.  Moreover, the holding in this case covers only one 
type of contract, that between an employer and its covered employees, in contrast 
to the broad rule adopted by the California Supreme Court at issue in 
[Concepcion].  Accordingly, any intrusion on the policies underlying the FAA is 
similarly limited.‖  (Horton I, supra, 357 NLRB No. 184, pp. 11–12, fn. omitted 
[2012 WL 36274 at p. *15, fn. omitted].) 
―Finally,‖ the Board said, ―even if there were a conflict between the NLRA 
and the FAA, there are strong indications that the FAA would have to yield under 
the terms of the Norris-LaGuardia Act.  As explained above, under the Norris-
LaGuardia Act, a private agreement that seeks to prohibit a ‗lawful means [of] 
aiding any person participating or interested in‘ a lawsuit arising out of a labor 
dispute (as broadly defined) is unenforceable, as contrary to the public policy 
protecting employees‘ ‗concerted activities for . . . mutual aid or protection.‘  To 
the extent that the FAA requires giving effect to such an agreement, it would 
conflict with the Norris-LaGuardia Act.  The Norris-LaGuardia Act, in turn—
passed 7 years after the FAA,—repealed ‗[a]ll acts and parts of acts in conflict‘ 
with the later statute (Section 15).‖  (Horton I, supra, 357 NLRB No. 184, p. 12, 
fn. omitted [2012 WL 36274 at p. *16, fn. omitted].) 
 
17 
B. 
In Horton II, the Fifth Circuit disagreed with the Board‘s ruling that the 
class action waiver in the MAA was an unfair labor practice.  The court 
recognized precedent holding that ― ‗the filing of a civil action by employees is 
protected activity . . . [and] by joining together to file the lawsuit [the employees] 
engaged in concerted activity.‘  127 Rest. Corp., 331 NLRB 269, 275–76 (2000).  
‗[A] lawsuit filed in good faith by a group of employees to achieve more favorable 
terms or conditions of employment is ―concerted activity‖ under Section 7‘ of the 
NLRA.  Brady v. Nat’l Football League, 644 F.3d 661, 673 (8th Cir. 2011).‖  
(Horton II, supra, 737 F.3d at p. 356.)  However, the Fifth Circuit reasoned, ―The 
[FAA] has equal importance in our review.  Caselaw under the FAA points us in a 
different direction than the course taken by the Board.‖  (Id. at p. 357.) 
Relying on Concepcion, the Fifth Circuit rejected the argument that the 
Board‘s rule fell within the savings clause of the FAA.  A rule that is neutral on its 
face but is ―applied in a fashion that disfavors arbitration‖ is not a ground that 
exists ―for the revocation of any contract‖ within the meaning of the savings 
clause.  (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1747].)  The Fifth 
Circuit concluded that the Board‘s rule, like the rule in Discover Bank, was not 
arbitration neutral.  Rather, by substituting class proceedings for individual 
arbitration, the rule would significantly undermine arbitration‘s fundamental 
attributes by requiring procedural formality and complexity, and by creating 
greater risks to defendants.  (Horton II, supra, 737 F.3d at p. 359, citing 
Concepcion, supra, 563 U.S. at pp. __–__ [131 S.Ct. at pp. 1750–1752].) 
The court then considered whether ―the FAA‘s mandate has been 
‗overridden by a contrary congressional command.‘ ‖  (CompuCredit v. 
Greenwood (2012) 565 U.S. __, __ [132 S.Ct. 665, 669]; see Italian Colors, 
supra, 570 U.S. at p. __ [133 S.Ct. at p. 2309].)  ―If such a command exists, it 
 
18 
‗will be discoverable in the text,‘ the statute‘s ‗legislative history,‘ or ‗an ―inherent 
conflict‖ between arbitration and the [statute‘s] underlying purposes.‘ . . .  ‗[T]he 
relevant inquiry [remains] whether Congress . . . precluded ―arbitration or other 
nonjudicial resolution‖ of claims.‘ ‖  (Horton II, supra, 737 F.3d at p. 360, quoting 
Gilmer, supra, 500 U.S. at pp. 26, 28.)  The court found that neither the NLRA‘s 
language nor its legislative history showed any indication of prohibiting a class 
action waiver in an arbitration agreement.  (Horton II, at pp. 360–361.) 
Next, the Fifth Circuit considered whether there is ―an inherent conflict‖ 
between the FAA and the NLRA.  (Horton II, supra, 737 F.3d at p. 361.)  It noted 
that NLRA policy itself ―favors arbitration‖ and permits unions to waive the right 
of employees to litigate statutory employment claims in favor of arbitration.  
(Ibid.)  The court also noted that ―the right to proceed collectively cannot protect 
vindication of employees‘ statutory rights under the ADEA or FLSA because a 
substantive right to proceed collectively has been foreclosed by prior decisions.‖  
(Ibid., citing Gilmer, supra, 500 U.S. at p. 32 and Carter v. Countrywide Credit 
Industries, Inc. (5th Cir. 2004) 362 F.3d 294, 298.)  ―The right to collective action 
also cannot be successfully defended on the policy ground that it provides 
employees with greater bargaining power.  ‗Mere inequality in bargaining power 
. . . is not a sufficient reason to hold that arbitration agreements are never 
enforceable in the employment context.‘  Gilmer, 500 U.S. at 33.  The end result is 
that the Board‘s decision creates either a right that is hollow or one premised on an 
already-rejected justification.‖  (Horton II, at p. 361.) 
Further, the court observed that ―the NLRA was enacted and reenacted 
prior to the advent in 1966 of modern class action practice.  [Citation.]  We find 
limited force to the argument that there is an inherent conflict between the FAA 
and NLRA when the NLRA would have to be protecting a right of access to a 
procedure that did not exist when the NLRA was (re)enacted.‖  (Horton II, supra, 
 
19 
737 F.3d at p. 362, fn. omitted.)  For the reasons above, the court held that the 
NLRA does not foreclose enforcement of a class action waiver in an arbitration 
agreement.  (Horton II, at p. 363.) 
C. 
We agree with the Fifth Circuit that, in light of Concepcion, the Board‘s 
rule is not covered by the FAA‘s savings clause.  Concepcion makes clear that 
even if a rule against class waivers applies equally to arbitration and nonarbitration 
agreements, it nonetheless interferes with fundamental attributes of arbitration 
and, for that reason, disfavors arbitration in practice.  (Concepcion, supra, 563 
U.S. at pp. __–__ [131 S.Ct. at pp. 1750–1752].)  Thus, if the Board‘s rule is not 
precluded by the FAA, it must be because the NLRA conflicts with and takes 
precedence over the FAA with respect to the enforceability of class action waivers 
in employment arbitration agreements.  As the Fifth Circuit explained, neither the 
NLRA‘s text nor its legislative history contains a congressional command 
prohibiting such waivers.  (Horton II, supra, 737 F.3d at pp. 360–361.) 
We also agree that there is no inherent conflict between the FAA and the 
NLRA as that term is understood by the United States Supreme Court.  It is 
significant that ―the NLRA was enacted and reenacted prior to the advent in 1966 
of modern class action practice.‖  (Horton II, supra, 737 F.3d at p. 362.)  To be 
sure, ―the task of defining the scope of § 7 ‗is for the Board to perform in the first 
instance as it considers the wide variety of cases that come before it‘ ‖ (NLRB v. 
City Disposal Systems Inc. (1984) 465 U.S. 822, 829), and the forms of concerted 
activity protected by the NLRA are not necessarily limited to those that existed 
when the NLRA was enacted in 1935 or reenacted in 1947.  However, in Italian 
Colors, where the high court held that federal antitrust laws do not preclude 
enforcement of a class action waiver in an arbitration agreement, the high court 
found it significant that ―[t]he Sherman and Clayton Acts make no mention of 
 
20 
class actions.  In fact, they were enacted decades before the advent of Federal Rule 
of Civil Procedure 23 . . . .‖  (Italian Colors, supra, 570 U.S. at p. __ [133 S.Ct. at 
p. 2309].)  Here as well, like the Fifth Circuit, ―[w]e find limited force to the 
argument that there is an inherent conflict between the FAA and NLRA when the 
NLRA would have to be protecting a right of access to a procedure that did not 
exist when the NLRA was (re)enacted.‖  (Horton II, at p. 362, fn. omitted.) 
Furthermore, as the high court stated in Italian Colors:  ―In Gilmer, supra, 
we had no qualms in enforcing a class waiver in an arbitration agreement even 
though the federal statute at issue, the Age Discrimination in Employment Act, 
expressly permitted collective actions.  We said that statutory permission did 
‗ ―not mean that individual attempts at conciliation were intended to be 
barred.‖ ‘ ‖  Italian Colors, supra, 570 U.S. at p. __ [133 S.Ct. at p. 2311].)  Thus, 
the high court has held that the explicit authorization of class actions in the Age 
Discrimination in Employment Act (see 29 U.S.C. § 626(b), referencing, for 
purposes of enforcement 29 U.S.C. § 216 [providing for employee class actions as 
a remedy for Fair Labor Standard Act violations]) does not bar enforcement of a 
class waiver in an arbitration agreement.  This holding reinforces our doubt that 
the NLRA‘s general protection of concerted activity, which makes no reference to 
class actions, may be construed as an implied bar to a class action waiver. 
We do not find persuasive the Board‘s attempt to distinguish its rule from 
Discover Bank on the basis that employment arbitration class actions tend to be 
smaller than consumer class actions and thus ―far less cumbersome and more akin 
to an individual arbitration proceeding.‖  (Horton I, supra, 357 NLRB No. 184, 
p. 12 [2012 WL 36274 at p. *15].)  Nothing in Concepcion suggests that its rule 
upholding class action waivers, which relied significantly on the incompatibility 
between the formality of class proceedings and the informality of arbitration 
(Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1751]), depends on the size 
 
21 
of the class involved.  Nor does the limitation of a class action waiver to disputes 
between employers and employees mitigate the conflict between the Board‘s rule 
and the FAA under the reasoning of Concepcion. 
We thus conclude, in light of the FAA‘s ― ‗liberal federal policy favoring 
arbitration‘ ‖ (Concepcion, supra, 563 U.S. at p.__ [131 S.Ct. at p. 1745]), that 
sections 7 and 8 the NLRA do not represent ―a contrary congressional 
command‖ ‘ overriding the FAA‘s mandate.  (CompuCredit v. Greenwood, supra, 
565 U.S. at p. __ [132 S.Ct. at p. 669.)  This conclusion is consistent with the 
judgment of all the federal circuit courts and most of the federal district courts that 
have considered the issue.  (See Sutherland v. Ernst & Young, LLP (2d Cir. 2013) 
726 F.3d 290, 297 fn. 8; Owen v. Bristol Care, Inc. (8th Cir. 2013) 702 F.3d 1050, 
1053–1055; Delock v. Securitas Sec. Servs. USA, Inc. (E.D.Ark. 2012) 883 
F.Supp.2d 784, 789–790; Morvant v. P.F. Chang’s China Bistro, Inc. (N.D.Cal. 
2012) 870 F.Supp.2d 831, 844–845; Jasso v. Money Mart Express, Inc. (N.D.Cal. 
2012) 879 F.Supp.2d 1038, 1048–1049; but see Herrington v. Waterstone Mortg. 
Corp. (W.D.Wis. Mar. 16, 2012) No. 11-cv-779-bbc [2012 WL 1242318, at p. *5] 
[defendant advances no persuasive argument that the Board interpreted the NLRA 
incorrectly].) 
Our conclusion does not mean that the NLRA imposes no limits on the 
enforceability of arbitration agreements.  Notably, while upholding the class 
waiver in Horton II, the Fifth Circuit affirmed the Board‘s determination that the 
arbitration agreement at issue violated section 8(a)(1) and (4) of the NLRA insofar 
as it contained language that would lead employees to reasonably believe they 
were prohibited from filing unfair labor practice charges with the Board.  (Horton 
II, supra, 737 F.3d at pp. 363–364.)  Moreover, the arbitration agreement in the 
present case, apart from the class waiver, still permits a broad range of collective 
activity to vindicate wage claims.  CLS points out that the agreement here is less 
 
22 
restrictive than the one considered in Horton:  The arbitration agreement does not 
prohibit employees from filing joint claims in arbitration, does not preclude the 
arbitrator from consolidating the claims of multiple employees, and does not 
prohibit the arbitrator from awarding relief to a group of employees.  The 
agreement does not restrict the capacity of employees to ―discuss their claims with 
one another, pool their resources to hire a lawyer, seek advice and litigation 
support from a union, solicit support from other employees, and file similar or 
coordinated individual claims.‖  (Horton I, supra, 357 NLRB No. 184, p. 6 [2012 
WL 36274 at p. *8]; cf. Italian Colors, supra, 570 U.S. at p. __, fn. 4 [133 S. Ct. at 
p. 2311, fn. 4 [making clear that its holding applies only to class action waivers 
and not to provisions barring ―other forms of cost sharing‖].)  We have no 
occasion to decide whether an arbitration agreement that more broadly restricts 
collective activity would run afoul of section 7. 
IV. 
Code of Civil Procedure section 1281.2 provides that one ground for 
denying a petition to compel arbitration is that ―[t]he right to compel arbitration 
has been waived by the petitioner.‖  Iskanian contends that CLS waived its right to 
arbitration by failing to diligently pursue arbitration.  We disagree. 
―As our decisions explain, the term ‗waiver‘ has a number of meanings in 
statute and case law.  [Citation.]  While ‗waiver‘ generally denotes the voluntary 
relinquishment of a known right, it can also refer to the loss of a right as a result of 
a party‘s failure to perform an act it is required to perform, regardless of the 
party‘s intent to relinquish the right.  [Citations.]  In the arbitration context, ‗[t]he 
term ―waiver‖ has also been used as a shorthand statement for the conclusion that 
a contractual right to arbitration has been lost.‘  [Citation.]‖  (St. Agnes Medical 
 
23 
Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4 (St. Agnes 
Medical Center).) 
―California courts have found a waiver of the right to demand arbitration in 
a variety of contexts, ranging from situations in which the party seeking to compel 
arbitration has previously taken steps inconsistent with an intent to invoke 
arbitration [citations] to instances in which the petitioning party has unreasonably 
delayed in undertaking the procedure.  [Citations.]  The decisions likewise hold 
that the ‗bad faith‘ or ‗willful misconduct‘ of a party may constitute a waiver and 
thus justify a refusal to compel arbitration.  [Citation.]‖  (Davis v. Blue Cross of 
Northern California (1979) 25 Cal.3d 418, 425–426.)  The fact that the party 
petitioning for arbitration has participated in litigation, short of a determination on 
the merits, does not by itself constitute a waiver.  (St. Agnes Medical Center, 
supra, 31 Cal.4th at p. 1203.) 
We have said the following factors are relevant to the waiver inquiry: 
― ‗ ―(1) whether the party‘s actions are inconsistent with the right to arbitrate; 
(2) whether ‗the litigation machinery has been substantially invoked‘ and the 
parties ‗were well into preparation of a lawsuit‘ before the party notified the 
opposing party of an intent to arbitrate; (3) whether a party either requested 
arbitration enforcement close to the trial date or delayed for a long period before 
seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim 
without asking for a stay of the proceedings; (5) ‗whether important intervening 
steps [e.g., taking advantage of judicial discovery procedures not available in 
arbitration] had taken place‘; and (6) whether the delay ‗affected, misled, or 
prejudiced‘ the opposing party.‖ ‘ ‖  (St. Agnes Medical Center, supra, 31 Cal.4th 
at p. 1196.)  
In light of the policy in favor of arbitration, ―waivers are not to be lightly 
inferred and the party seeking to establish a waiver bears a heavy burden of 
 
24 
proof.‖   (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1195.)  ―Generally, the 
determination of waiver is a question of fact, and the trial court‘s finding, if 
supported by sufficient evidence, is binding on the appellate court.  [Citation.]  
‗When, however, the facts are undisputed and only one inference may reasonably 
be drawn, the issue is one of law and the reviewing court is not bound by the trial 
court‘s ruling.‘ ‖  (Id.at p. 1196.) 
In the present case, CLS initially filed a timely petition to compel 
arbitration in response to Iskanian‘s complaint, which included class action claims.  
After the trial court granted the petition, this court issued Gentry, which restricted 
the enforceability of class waivers, and the Court of Appeal remanded the matter 
to the trial court to determine whether Gentry affected the ruling.  Rather than 
further litigate the petition to compel arbitration, CLS withdrew the petition and 
proceeded to litigate the claim and resist Iskanian‘s move to certify a class.  The 
parties engaged in discovery, both as to the merits and on the class certification 
issue.  In October of 2009, the trial court granted Iskanian‘s motion to certify the 
class.  In May of 2011, shortly after the Supreme Court filed Concepcion, which 
cast Gentry into doubt, CLS renewed its petition to compel arbitration.  The trial 
court granted the petition. 
CLS contends that it has never acted inconsistently with its right to 
arbitrate.  It initially petitioned to compel arbitration and then abandoned 
arbitration only when Gentry made clear that further petition would be futile.  It 
moved to compel arbitration again as soon as a change in the law made clear the 
motion had a chance of succeeding.  In response, Iskanian contends that California 
law does not recognize futility as a legitimate ground for delaying the assertion of 
the right to arbitration and that even if there were such an exception, it should not 
apply here because even after Gentry, CLS‘s petition to compel arbitration had 
some chance of success. 
 
25 
This court has not explicitly recognized futility as a ground for delaying a 
petition to compel arbitration.  (Compare Fisher v. A.G. Becker Paribas Inc. (9th 
Cir. 1986) 791 F.2d 691, 697 [delay in asserting arbitration rights excusable when 
prevailing ―intertwining doctrine‖ made such an assertion futile until Supreme 
Court rejected the doctrine].)  But futility as grounds for delaying arbitration is 
implicit in the general waiver principles we have endorsed.  A factor relevant to 
the waiver inquiry is whether the party asserting arbitration has acted 
inconsistently with the right to arbitrate (see St. Agnes Medical Center, supra, 31 
Cal.4th at p. 1196) or whether a delay was ―unreasonable‖ (Lewis v. Fletcher 
Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 446 (Fletcher Jones)).  The 
fact that a party initially successfully moved to compel arbitration and abandoned 
that motion only after a change in the law made the motion highly unlikely to 
succeed weighs in favor of finding that the party has not waived its right to 
arbitrate. 
Iskanian points out that Gentry did not purport to invalidate all class 
waivers in wage and hour cases, but only in those instances when a class action or 
arbitration ―is likely to be a significantly more effective practical means of 
vindicating the rights of the affected employees than individual litigation or 
arbitration.‖  (Gentry, supra, 42 Cal.4th at p. 463.)  In this case, however, neither 
party has ever disputed that the class action waiver at issue would not have 
survived Gentry.  This case is therefore distinguishable from cases finding 
unexcused delay where the party asserting arbitration had some real chance of 
succeeding in compelling individual arbitration under extant law applicable to 
class waivers.  (See Fletcher Jones, supra, 205 Cal.App.4th at p. 448 [Discover 
Bank‘s holding that consumer class action waivers are prohibited in the case of 
small damages claims did not preclude class waiver where plaintiff sought 
$19,000 in damages].) 
 
26 
Iskanian contends that because he spent three years attempting to obtain 
class certification, including considerable effort and expense on discovery, waiver 
should be found on the ground that the delay in the start of arbitration prejudiced 
him.  We have said that ―prejudice . . . is critical in waiver determinations.‖  (St. 
Agnes Medical Center, supra, 31 Cal.4th at p. 1203.)  But ―[b]ecause merely 
participating in litigation, by itself, does not result in . . . waiver, courts will not 
find prejudice where the party opposing arbitration shows only that it incurred 
court costs and legal expenses.‖  (Ibid.)  ―Prejudice typically is found only where 
the petitioning party‘s conduct has substantially undermined this important public 
policy or substantially impaired the other side‘s ability to take advantage of the 
benefits and efficiencies of arbitration.  [¶]  For example, courts have found 
prejudice where the petitioning party used the judicial discovery processes to gain 
information about the other side‘s case that could not have been gained in 
arbitration [citations]; where a party unduly delayed and waited until the eve of 
trial to seek arbitration [citation]; or where the lengthy nature of the delays 
associated with the petitioning party‘s attempts to litigate resulted in lost evidence 
[citation].‖  (Id. at p. 1204.) 
Some courts have interpreted St. Agnes Medical Center to allow 
consideration of the expenditure of time and money in determining prejudice 
where the delay is unreasonable.  In Burton v. Cruise (2010) 190 Cal.App.4th 939, 
for example, the court reasoned that ―a petitioning party‘s conduct in stretching 
out the litigation process itself may cause prejudice by depriving the other party of 
the advantages of arbitration as an ‗expedient, efficient and cost-effective method 
to resolve disputes.‘  [Citation.]  Arbitration loses much, if not all, of its value if 
undue time and money is lost in the litigation process preceding a last-minute 
petition to compel.‖  (Id. at p. 948.)  Other courts have likewise found that 
unjustified delay, combined with substantial expenditure of time and money, 
 
27 
deprived the parties of the benefits of arbitration and was sufficiently prejudicial to 
support a finding of waiver to arbitrate.  (See, e.g., Hoover v. American Income 
Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1205; Roberts v. El Cajon Motors, Inc. 
(2011) 200 Cal.App.4th 832, 845–846; Adolph v. Coastal Auto Sales, Inc. (2010) 
184 Cal.App.4th 1443, 1451; Guess? Inc. v. Superior Court (2000) 79 Cal.App.4th 
553, 558; Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 996; but see 
Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1197 [excluding time and 
expense from the calculus of prejudice].) 
These cases, however, do not support Iskanian‘s position.  In each of them, 
substantial expense and delay were caused by the unreasonable or unjustified 
conduct of the party seeking arbitration.  In this case, the delay was reasonable in 
light of the state of the law at the time and Iskanian‘s own opposition to 
arbitration.  Where, as here, a party promptly initiates arbitration and then 
abandons arbitration because it is resisted by the opposing party and foreclosed by 
existing law, the mere fact that the parties then proceed to engage in various forms 
of pretrial litigation does not compel the conclusion that the party has waived its 
right to arbitrate when a later change in the law permits arbitration. 
Moreover, the case before us is not one where ―the petitioning party used 
the judicial discovery processes to gain information about the other side‘s case that 
could not have been gained in arbitration‖ or ―where the lengthy nature of the 
delays associated with the petitioning party‘s attempts to litigate resulted in lost 
evidence.‖  (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1204.)  No such 
prejudice has been shown here.  As CLS points out, without contradiction by 
Iskanian, the discovery it obtained while the case was in court consisted of 
Iskanian‘s deposition and 77 pages of documents pertaining to his individual wage 
claim.  Because the arbitration agreement itself provides for ―reasonable 
discovery,‖ there is no indication that CLS obtained any material information 
 
28 
through pretrial discovery that it could not have obtained through arbitral 
discovery. 
In sum, Iskanian does not demonstrate that CLS‘s delay in pursuing 
arbitration was unreasonable or that pretrial proceedings have resulted in 
cognizable prejudice.  We conclude that CLS has not waived its right to arbitrate. 
V. 
As noted, the arbitration agreement requires the waiver not only of class 
actions but of ―representative actions.‖  There is no dispute that the contract‘s term 
―representative actions‖ covers representative actions brought under the Private 
Attorneys General Act.  (Lab. Code, § 2968 et seq.; all subsequent undesignated 
statutory references are to this code.)  We must decide whether such waivers are 
permissible under state law and, if not, whether the FAA preempts a state law rule 
prohibiting such waivers. 
A. 
Before enactment of the PAGA in 2004, several statutes provided civil 
penalties for violations of the Labor Code.  The Labor Commissioner could bring 
an action to obtain such penalties, with the money going into the general fund or 
into a fund created by the Labor and Workforce Development Agency (Agency) 
for educating employers.  (See § 210 [civil penalties for violating various statutes 
related to the timing and manner in which wages are to be paid]; § 225.5 [civil 
penalties for violating various statutes related to withholding wages due]; Stats. 
1983, ch. 1096.)  Some Labor Code violations were criminal misdemeanors.  (See 
§§ 215, 216, 218.) 
The PAGA addressed two problems.  First, the bill sponsors observed that 
―many Labor Code provisions are unenforced because they are punishable only as 
criminal misdemeanors, with no civil penalty or other sanction attached.  Since 
district attorneys tend to direct their resources to violent crimes and other public 
 
29 
priorities, Labor Code violations rarely result in criminal investigations and 
prosecutions.‖  (Sen. Judiciary Com., Analysis of Sen. Bill No. 796 (Reg. Sess. 
2003–2004) as amended Apr. 22, 2003, p. 5.)  The solution was to enact civil 
penalties for Labor Code violations ―significant enough to deter violations.‖  
(Ibid.)  For Labor Code violations for which no penalty is provided, the PAGA 
provides that the penalties are generally $100 for each aggrieved employee per pay 
period for the initial violation and $200 per pay period for each subsequent 
violation.  (§ 2699, subd. (f)(2).) 
The second problem was that even when statutes specified civil penalties, 
there was a shortage of government resources to pursue enforcement.  The 
legislative history discussed this problem at length.  Evidence gathered by the 
Assembly Committee on Labor and Employment indicated that the Department of 
Industrial Relations (DIR) ―was failing to effectively enforce labor law violations.  
Estimates of the size of California‘s ‗underground economy‘ –– businesses 
operating outside the state‘s tax and licensing requirements –– ranged from 60 to 
140 billion dollars a year, representing a tax loss to the state of three to six billion 
dollars annually.  Further, a U.S. Department of Labor study of the garment 
industry in Los Angeles, which employs over 100,000 workers, estimated the 
existence of over 33,000 serious and ongoing wage violations by the city‘s 
garment industry employers, but that DIR was issuing fewer than 100 wage 
citations per year for all industries throughout the state.  [¶] Moreover, evidence 
demonstrates that the resources dedicated to labor law enforcement have not kept 
pace with the growth of the economy in California.‖  (Assembly Com. on Labor 
and Employment, Analysis of Sen. Bill No. 796 (Reg. Sess. 2003–2004) as 
amended July 2, 2003, p. 4.) 
We summarized the Legislature‘s response to this problem in Arias v. 
Superior Court (2009) 46 Cal.4th 969, 980–981 (Arias):  ―In September 2003, the 
 
30 
Legislature enacted the Labor Code Private Attorneys General Act of 2004 
[citations].  The Legislature declared that adequate financing of labor law 
enforcement was necessary to achieve maximum compliance with state labor laws, 
that staffing levels for labor law enforcement agencies had declined and were 
unlikely to keep pace with the future growth of the labor market, and that it was 
therefore in the public interest to allow aggrieved employees, acting as private 
attorneys general, to recover civil penalties for Labor Code violations, with the 
understanding that labor law enforcement agencies were to retain primacy over 
private enforcement efforts.  (Stats. 2003, ch. 906, § 1.) 
―Under this legislation, an ‗aggrieved employee‘ may bring a civil action 
personally and on behalf of other current or former employees to recover civil 
penalties for Labor Code violations.  (Lab. Code, § 2699, subd. (a).)  Of the civil 
penalties recovered, 75 percent goes to the Labor and Workforce Development 
Agency, leaving the remaining 25 percent for the ‗aggrieved employees.‘  (Id., 
§ 2699, subd. (i).) 
―Before bringing a civil action for statutory penalties, an employee must 
comply with Labor Code section 2699.3.  (Lab. Code, § 2699, subd. (a).)  That 
statute requires the employee to give written notice of the alleged Labor Code 
violation to both the employer and the Labor and Workforce Development 
Agency, and the notice must describe facts and theories supporting the violation.  
(Id., § 2699.3, subd. (a).)  If the agency notifies the employee and the employer 
that it does not intend to investigate . . . , or if the agency fails to respond within 
33 days, the employee may then bring a civil action against the employer.  (Id., 
§ 2699.3, subd. (a)(2)(A).)  If the agency decides to investigate, it then has 120 
days to do so.  If the agency decides not to issue a citation, or does not issue a 
citation within 158 days after the postmark date of the employee‘s notice, the 
 
31 
employee may commence a civil action.  (Id., § 2699.3, subd. (a)(2)(B).)‖  (Arias, 
supra, 46 Cal.4th at pp. 980–981, fn. omitted.) 
In Arias, the defendants argued that if the PAGA were not ―construed as 
requiring representative actions under the act to be brought as class actions,‖ then 
a defendant could be subjected to lawsuits by multiple plaintiffs raising a common 
claim, none of whom would be bound by a prior judgment in the defendant‘s favor 
because they were not parties to a prior lawsuit.  (Arias, supra, 46 Cal.4th at 
p. 985.)  We rejected this due process concern on the ground that ―the judgment in 
[a PAGA representative] action is binding not only on the named employee 
plaintiff but also on government agencies and any aggrieved employee not a party 
to the proceeding.‖  (Ibid.)  We reached this conclusion by elucidating the legal 
characteristics of a PAGA representative action:  ―An employee plaintiff suing . . . 
under the [PAGA] does so as the proxy or agent of the state‘s labor law 
enforcement agencies. . . .  In a lawsuit brought under the act, the employee 
plaintiff represents the same legal right and interest as state labor law enforcement 
agencies — namely, recovery of civil penalties that otherwise would have been 
assessed and collected by the Labor Workforce Development Agency.  [Citations.] 
. . . .  Because collateral estoppel applies not only against a party to the prior 
action in which the issue was determined, but also against those for whom the 
party acted as an agent or proxy [citations], a judgment in an employee‘s action 
under the act binds not only that employee but also the state labor law enforcement 
agencies. 
―Because an aggrieved employee‘s action under the [PAGA] functions as a 
substitute for an action brought by the government itself, a judgment in that action 
binds all those, including nonparty aggrieved employees, who would be bound by 
a judgment in an action brought by the government.  The act authorizes a 
representative action only for the purpose of seeking statutory penalties for Labor 
 
32 
Code violations (Lab. Code, § 2699, subds. (a), (g)), and an action to recover civil 
penalties ‗is fundamentally a law enforcement action designed to protect the 
public and not to benefit private parties‘ (People v. Pacific Land Research Co. 
(1977) 20 Cal.3d 10, 17).  When a government agency is authorized to bring an 
action on behalf of an individual or in the public interest, and a private person 
lacks an independent legal right to bring the action, a person who is not a party but 
who is represented by the agency is bound by the judgment as though the person 
were a party.  (Rest.2d Judgments, § 41, subd. (1)(d), com. d, p. 397.)  
Accordingly, with respect to the recovery of civil penalties, nonparty employees as 
well as the government are bound by the judgment in an action brought under the 
act, and therefore defendants‘ due process concerns are to that extent unfounded.‖  
(Arias, supra, 46 Cal.4th at p. 986.) 
The civil penalties recovered on behalf of the state under the PAGA are 
distinct from the statutory damages to which employees may be entitled in their 
individual capacities.  Case law has clarified the distinction ―between a request for 
statutory penalties provided by the Labor Code for employer wage-and-hour 
violations, which were recoverable directly by employees well before the [PAGA] 
became part of the Labor Code, and a demand for ‗civil penalties,‘ previously 
enforceable only by the state‘s labor law enforcement agencies.  An example of 
the former is section 203, which obligates an employer that willfully fails to pay 
wages due an employee who is discharged or quits to pay the employee, in 
addition to the unpaid wages, a penalty equal to the employee‘s daily wages for 
each day, not exceeding 30 days, that the wages are unpaid.  [Citation.]  Examples 
of the latter are section 225.5, which provides, in addition to any other penalty that 
may be assessed, an employer that unlawfully withholds wages in violation of 
certain specified provisions of the Labor Code is subject to a civil penalty in an 
enforcement action initiated by the Labor Commissioner in the sum of $100 per 
 
33 
employee for the initial violation and $200 per employee for subsequent or willful 
violations, and section 256, which authorizes the Labor Commissioner to ‗impose 
a civil penalty in an amount not exceeding 30 days [sic] pay as waiting time under 
the terms of Section 203.‘ ‖  (Caliber Bodyworks, Inc. v. Superior Court (2005) 
134 Cal.App.4th 365, 377–378, fns. omitted; see Murphy v. Kenneth Cole 
Productions, Inc. (2007) 40 Cal.4th 1094, 1114 [distinguishing premium pay 
under section 226.7 from a civil penalty in determining the applicable statute of 
limitations].) 
A PAGA representative action is therefore a type of qui tam action.  
―Traditionally, the requirements for enforcement by a citizen in a qui tam action 
have been (1) that the statute exacts a penalty; (2) that part of the penalty be paid 
to the informer; and (3) that, in some way, the informer be authorized to bring suit 
to recover the penalty.‖  (Sanders v. Pacific Gas & Elec. Co. (1975) 53 
Cal.App.3d 661, 671 (Sanders).)  The PAGA conforms to these traditional criteria, 
except that a portion of the penalty goes not only to the citizen bringing the suit 
but to all employees affected by the Labor Code violation.  The government entity 
on whose behalf the plaintiff files suit is always the real party in interest in the 
suit.  (See In re Marriage of Biddle (1997) 52 Cal.App.4th 396, 399.)   
 
Although the PAGA was enacted relatively recently, the use of qui tam 
actions is venerable, dating back to colonial times, and several such statutes were 
enacted by the First Congress.  (See Vermont Agency of Natural Resources v. 
United States ex rel. Stevens (2000) 529 U.S. 765, 776–777.)  The Federal False 
Claims Act, allowing individuals to share the recovery achieved by the reporting 
of false claims, originated during the Civil War.  (See United States ex rel. Marcus 
v. Hess (1943) 317 U.S. 537, 539–540; 31 U.S.C § 3730.)  The qui tam plaintiff 
under the Federal False Claims Act has standing in federal court under article III 
of the United States Constitution, even though the plaintiff has suffered no injury 
 
34 
in fact, because that statute ―can reasonably be regarded as effecting a partial 
assignment of the Government‘s damages claim.‖  (Stevens, at p. 773.)  California 
has more recently authorized qui tam actions for the recovery of false claims 
against the state treasury.  (Gov. Code, § 12652, subd. (c), added by Stats. 1987, 
ch. 1420, § 1, p. 5239.)  In addition, there are earlier examples of qui tam actions 
under California law.  (See, e.g., Sanders, supra, 53 Cal.App.3d at p. 671 [noting 
qui tam provision in Political Reform Act of 1974].) 
B. 
With this background, we first examine whether an employee‘s right to 
bring a PAGA action is waivable.  The unwaivability of certain statutory rights 
―derives from two statutes that are themselves derived from public policy.  First, 
Civil Code section 1668 states:  ‗All contracts which have for their object, directly 
or indirectly, to exempt anyone from responsibility for his own fraud, or willful 
injury to the person or property of another, or violation of law, whether willful or 
negligent, are against the policy of the law.‘  ‗Agreements whose object, directly 
or indirectly, is to exempt [their] parties from violation of the law are against 
public policy and may not be enforced.‘  (In re Marriage of Fell (1997) 55 
Cal.App.4th 1058, 1065.)  Second, Civil Code section 3513 states, ‗Anyone may 
waive the advantage of a law intended solely for his benefit.  But a law established 
for a public reason cannot be contravened by a private agreement.‘ ‖  (Armendariz 
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 100 
(Armendariz).) 
These statutes compel the conclusion that an employee‘s right to bring a 
PAGA action is unwaivable.  Section 2699, subdivision (a) states:  
―Notwithstanding any other provision of law, any provision of this code that 
provides for a civil penalty to be assessed and collected by the Labor and 
 
35 
Workforce Development Agency . . . for a violation of this code, may, as an 
alternative, be recovered through a civil action brought by an aggrieved employee 
on behalf of himself or herself and other current or former employees pursuant to 
the procedures specified in Section 2699.3.‖  As noted, the Legislature‘s purpose 
in enacting the PAGA was to augment the limited enforcement capability of the 
Labor and Workforce Development Agency by empowering employees to enforce 
the Labor Code as representatives of the Agency.  Thus, an agreement by 
employees to waive their right to bring a PAGA action serves to disable one of the 
primary mechanisms for enforcing the Labor Code.  Because such an agreement 
has as its ―object, . . . indirectly, to exempt [the employer] from responsibility for 
[its] own . . . violation of law,‖ it is against public policy and may not be enforced.  
(Civ. Code, § 1668.).) 
Such an agreement also violates Civil Code section 3513‘s injunction that 
―a law established for a public reason cannot be contravened by a private 
agreement.‖  The PAGA was clearly established for a public reason, and 
agreements requiring the waiver of PAGA rights would harm the state‘s interests 
in enforcing the Labor Code and in receiving the proceeds of civil penalties used 
to deter violations.  Of course, employees are free to choose whether or not to 
bring PAGA actions when they are aware of Labor Code violations.  (See 
Armendariz, supra, 24 Cal.4th at p. 103, fn. 8 [waivers freely made after a dispute 
has arisen are not necessarily contrary to public policy].)  But it is contrary to 
public policy for an employment agreement to eliminate this choice altogether by 
requiring employees to waive the right to bring a PAGA action before any dispute 
arises. 
CLS argues that the arbitration agreement at issue here prohibits only 
representative claims, not individual PAGA claims for Labor Code violations that 
an employee suffered.  Iskanian contends that the PAGA, which authorizes an 
 
36 
aggrieved employee to file a claim ―on behalf of himself or herself and other 
current or former employees‖ (§ 2699, subd. (a), italics added), does not permit an 
employee to file an individual claim.  (Compare Reyes v. Macy’s, Inc. (2011) 202 
Cal.App.4th 1119, 1123–1124 [agreeing with Iskanian‘s position] with Quevedo v. 
Macy’s, Inc. (C.D.Cal. 2011) 798 F.Supp.2d 1122, 1141–1142 [an employee may 
bring an individual PAGA action and waive the right to bring it on behalf of other 
employees].)  But whether or not an individual claim is permissible under the 
PAGA, a prohibition of representative claims frustrates the PAGA‘s objectives.  
As one Court of Appeal has observed:  ―[A]ssuming it is authorized, a single-
claimant arbitration under the PAGA for individual penalties will not result in the 
penalties contemplated under the PAGA to punish and deter employer practices 
that violate the rights of numerous employees under the Labor Code.  That 
plaintiff and other employees might be able to bring individual claims for Labor 
Code violations in separate arbitrations does not serve the purpose of the PAGA, 
even if an individual claim has collateral estoppel effects.  (Arias, supra, 46 
Cal.4th at pp. 985–987.)  Other employees  would still have to assert their claims 
in individual proceedings.‖  (Brown v. Ralphs Grocery Co. (2011) 197 
Cal.App.4th 489, 502, fn. omitted.) 
We conclude that where, as here, an employment agreement compels the 
waiver of representative claims under the PAGA, it is contrary to public policy 
and unenforceable as a matter of state law. 
C. 
Notwithstanding the analysis above, a state law rule, however laudable, 
may not be enforced if it is preempted by the FAA.  As Concepcion made clear, a 
state law rule may be preempted when it ―stands as an obstacle to the 
accomplishment of the FAA‘s objectives.‖  (Concepcion, supra, 563 U.S. at p. __ 
[131 S.Ct. at p. 1748].)  We conclude that the rule against PAGA waivers does not 
 
37 
frustrate the FAA‘s objectives because, as explained below, the FAA aims to 
ensure an efficient forum for the resolution of private disputes, whereas a PAGA 
action is a dispute between an employer and the state Labor and Workforce 
Development Agency. 
The FAA‘s focus on private disputes finds expression in the statute‘s text: 
―A written provision in any maritime transaction or a contract evidencing a 
transaction involving commerce to settle by arbitration a controversy thereafter 
arising out of such contract or transaction . . . shall be valid, irrevocable, and 
enforceable, save upon such grounds as exist at law or in equity for the revocation 
of any contract.‖  (9 U.S.C. § 2, italics added.)   Although the italicized language 
may be read to indicate that the FAA applies only to disputes about contractual 
rights, not statutory rights (see Friedman, The Lost Controversy Limitation of the 
Federal Arbitration Act (2012) 46 U.Rich. L.Rev. 1005, 1037–1045), the high 
court has found the FAA applicable to statutory claims between parties to an 
arbitration agreement (see, e.g., Mitsubishi Motors v. Soler Chrysler-Plymouth 
(1985) 473 U.S. 614, 635–637).  Even so, however, the statutory phrase ―a 
controversy thereafter arising out of such contract or transaction‖ is most naturally 
read to mean a dispute about the respective rights and obligations of parties in a 
contractual relationship. 
The FAA‘s focus on private disputes is further revealed in its legislative 
history, which shows that the FAA‘s primary object was the settlement of ordinary 
commercial disputes.  (See J. Hearings on Sen. Bill No. 1005 and H.Res. No. 646 
before the Subcommittees of the Committees on the Judiciary, 68th Cong., 1st 
Sess., 15 (1924) at p. 29 [testimony of FAA drafter Julius Henry Cohen that the 
act will merely make enforceable the customs of trade associations to arbitrate 
disputes]; id. at p. 7 [testimony of Charles Bernheimer, Chairman of Com. on 
Arbitration, N.Y. State Chamber of Commerce, that FAA is designed to resolve 
 
38 
―ordinary everyday trade disputes‖ between merchants].)  There is no indication 
that the FAA was intended to govern disputes between the government in its law 
enforcement capacity and private individuals.  Furthermore, although qui tam 
citizen actions on behalf of the government were well established at the time the 
FAA was enacted (see ante, at p. 33), there is no mention of such actions in the 
legislative history and no indication that the FAA was concerned with limiting 
their scope.  (Compare Concepcion, supra, 563 U.S. at pp. __–__ [131 S.Ct. at 
pp. 1751–1752] [noting that class arbitration was not envisioned by the Congress 
that enacted the FAA].) 
Consistent with this understanding, the United States Supreme Court‘s 
FAA jurisprudence — with one exception discussed below — consists entirely of 
disputes involving the parties‘ own rights and obligations, not the rights of a public 
enforcement agency.  (See, e.g., Italian Colors, supra, 570 U.S. at p. __ [133 S. 
Ct. at p. 2308] [class action by merchants for excessive credit card fees charged in 
violation of antitrust laws]; Marmet Health Care Center, Inc. v. Brown (2012) 565 
U.S. __, __ [132 S.Ct. 1201, 1202–1203] [wrongful death action]; Concepcion, 
supra, 563 U.S. at p. __ [131 S.Ct. at p. 1744] [class action suit for damages over 
fraudulent practices]; Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, __ 
[130 S.Ct. 2772, 2775] [employment discrimination suit]; Stolt-Nielsen S.A. v. 
AnimalFeeds International Corp. (2010) 559 U.S. 662, 667 [antitrust dispute 
involving price fixing and supracompetitive pricing]; Preston v. Ferrer (2008) 552 
U.S. 346, 350 [action by attorney to recover fees from former client]; Buckeye 
Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440, 443 [class action by 
borrowers against lender for alleged usurious loans]; Green Tree Financial 
Corp. v. Bazzle (2003) 539 U.S. 444, 449 [class action damages suit by borrowers 
against lender for violations of South Carolina law]; Doctor’s Associates, Inc. v. 
Casarotto (1996) 517 U.S. 681, 683 [contract and fraud claims related to franchise 
 
39 
agreement]; Rodriguez de Quijas v. Shearson/Am. Exp. (1989) 490 U.S. 477, 478–
479 [various statutory causes of actions by investors against broker over 
investments ―turned sour‖]; Volt Information Sciences, Inc. v. Board of Trustees of 
Leland Stanford Junior Univ. (1989) 489 U.S. 468, 470–471 [action for fraud and 
breach of contract]; Perry v. Thomas (1987) 482 U.S. 483, 484–485 [suit for 
breach of contract, conversion, and breach of fiduciary duty arising from 
employment relationship]; Shearson/American Express Inc. v. McMahon (1987) 
482 U.S. 220, 222–223 [suit against brokerage firm by clients alleging various 
statutory causes of action]; Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 
473 U.S. 614, 619–620 [contract, defamation, and antitrust dispute between 
automobile companies]; Southland Corp. v. Keating (1984) 465 U.S. 1, 4 [class 
action suit for fraud, breach of contract, breach of fiduciary duty, and violation of 
state disclosure requirements related to franchise agreement]; Gilmer v. 
Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 23–24 [employment age 
discrimination suit]; Moses H. Cone Memorial Hospital v. Mercury Construction 
Corp. (1983) 460 U.S. 1, 6–7 [contract dispute].) 
The one case in which the high court has considered the enforcement of an 
arbitration agreement against the government does not support CLS‘s contention 
that the FAA preempts a PAGA action.  In EEOC v. Waffle House, Inc. (2002) 
534 U.S. 279 (Waffle House), the high court held that an employment arbitration 
agreement governed by the FAA does not prevent the Equal Employment 
Opportunity Commission (EEOC) from suing an employer on behalf of an 
employee bound by that agreement for victim-specific relief, such as reinstatement 
and back pay.  The court based its conclusion primarily on the fact that the EEOC 
was not a party to the arbitration agreement.  (Id. at pp. 288–289.)  Waffle House 
further noted that the EEOC was not a proxy for the individual employee, that the 
EEOC could prosecute the action without the employee‘s consent, and that the 
 
40 
employee did not exercise control over the litigation.  (Id. at p. 291.)  Whereas 
Waffle House involved a suit by the government seeking to obtain victim-specific 
relief on behalf of an employee bound by the arbitration agreement, this case 
involves an employee bound by an arbitration agreement bringing suit on behalf of 
the government to obtain remedies other than victim-specific relief, i.e., civil 
penalties paid largely into the state treasury.  Nothing in Waffle House suggests 
that the FAA preempts a rule prohibiting the waiver of this kind of qui tam action 
on behalf of the state for such remedies. 
Simply put, a PAGA claim lies outside the FAA‘s coverage because it is 
not a dispute between an employer and an employee arising out of their 
contractual relationship.  It is a dispute between an employer and the state, which 
alleges directly or through its agents — either the Labor and Workforce 
Development Agency or aggrieved employees — that the employer has violated 
the Labor Code.  Through his PAGA claim, Iskanian is seeking to recover civil 
penalties, 75 percent of which will go to the state‘s coffers.  We emphasized in 
Arias that ―an action to recover civil penalties ‗is fundamentally a law 
enforcement action designed to protect the public and not to benefit private 
parties‘ ‖; that ―[i]n a lawsuit brought under the [PAGA], the employee plaintiff 
represents the same legal right and interest as state labor law enforcement 
agencies‖; and that ―an aggrieved employee‘s action under the [PAGA] functions 
as a substitute for an action brought by the government itself.‖  (Arias, supra, 46 
Cal.4th at p. 986.)  The fact that any judgment in a PAGA action is binding on the 
government confirms that the state is the real party in interest.  (Ibid.)  It is true 
that ―a person may not bring a PAGA action unless he or she is ‗an aggrieved 
employee‘ (§ 2699, subd. (a))‖ (conc. opn., post, at p. 6), but that does not change 
the character of the litigant or the dispute.  As Justice Chin correctly observes, 
―every PAGA action, whether seeking penalties for Labor Code violations as to 
 
41 
only one aggrieved employee — the plaintiff bringing the action — or as to other 
employees as well, is a representative action on behalf of the state.‖  (Id. at p. 4.) 
Of course, any employee is free to forgo the option of pursuing a PAGA 
action.  But it is against public policy for an employment agreement to deprive 
employees of this option altogether, before any dispute arises.  (Ante, at pp. 34–
36.)  The question is whether this public policy contravenes the FAA.  Nothing in 
the text or legislative history of the FAA nor in the Supreme Court‘s construction 
of the statute suggests that the FAA was intended to limit the ability of states to 
enhance their public enforcement capabilities by enlisting willing employees in 
qui tam actions.  Representative actions under the PAGA, unlike class action suits 
for damages, do not displace the bilateral arbitration of private disputes between 
employers and employees over their respective rights and obligations toward each 
other.  Instead, they directly enforce the state’s interest in penalizing and deterring 
employers who violate California‘s labor laws.  In crafting the PAGA, the 
Legislature could have chosen to deputize citizens who were not employees of the 
defendant employer to prosecute qui tam actions.  The Legislature instead chose to 
limit qui tam plaintiffs to willing employees who had been aggrieved by the 
employer in order to avoid ―private plaintiff abuse.‖  (Sen. Judiciary Comm., 
Analysis of Sen. Bill No. 796 (Reg. Sess. 2003–2004) as amended Apr. 22, 2003, 
p. 7.)  This arrangement likewise does not interfere with the FAA‘s policy goal. 
Our opinion today would not permit a state to circumvent the FAA by, for 
example, deputizing employee A to bring a suit for the individual damages claims 
of employees B, C, and D.  This pursuit of victim-specific relief by a party to an 
arbitration agreement on behalf of other parties to an arbitration agreement would 
be tantamount to a private class action, whatever the designation given by the 
Legislature.  Under Concepcion, such an action could not be maintained in the 
face of a class waiver.  Here, importantly, a PAGA litigant‘s status as ―the proxy 
 
42 
or agent‖ of the state (Arias, supra, 46 Cal.4th at p. 986) is not merely semantic; it 
reflects a PAGA litigant‘s substantive role in enforcing our labor laws on behalf of 
state law enforcement agencies.  Our FAA holding applies specifically to a state 
law rule barring predispute waiver of an employee‘s right to bring an action that 
can only be brought by the state or its representatives, where any resulting 
judgment is binding on the state and any monetary penalties largely go to state 
coffers. 
Further, the high court has emphasized that ― ‗courts should assume that 
―the historic police powers of the States‖ are not superseded ―unless that was the 
clear and manifest purpose of Congress.‖ ‘  (Arizona v. United States (2012) 567 
U.S. __, __ [132 S.Ct. 2492, 2501]; see Chamber of Commerce v. Whiting (2011) 
563 U.S. __, __ [131 S.Ct. 1968, 1985] [‗Our precedents ―establish that a high 
threshold must be met if a state law is to be preempted for conflicting with the 
purposes of a federal Act.‖  [Citation.]‘].)‖  (Sonic II, supra, 57 Cal.4th at 
p. 1154.)  There is no question that the enactment and enforcement of laws 
concerning wages, hours, and other terms of employment is within the state‘s 
historic police power.  (See Metropolitan Life Ins. Co. v. Massachusetts (1985) 
471 U.S. 724, 756 [― ‗States possess broad authority under their police powers to 
regulate the employment relationship to protect workers within the State.‘ ‖]; 
Kerr’s Catering Service v. Dept. of Industrial Relations (1962) 57 Cal.2d 319, 
326–327.)  Moreover, how a state government chooses to structure its own law 
enforcement authority lies at the heart of state sovereignty.  (See Printz v. United 
States (1997) 521 U.S. 898, 928 [―It is an essential attribute of the State‘s retained 
sovereignty that they remain independent and autonomous within their proper 
sphere of authority.‖].)  We can discern in the FAA no purpose, much less a clear 
and manifest purpose, to curtail the ability of states to supplement their 
 
43 
enforcement capability by authorizing willing employees to seek civil penalties for 
Labor Code violations traditionally prosecuted by the state. 
In sum, the FAA aims to promote arbitration of claims belonging to the 
private parties to an arbitration agreement.  It does not aim to promote arbitration 
of claims belonging to a government agency, and that is no less true when such a 
claim is brought by a statutorily designated proxy for the agency as when the 
claim is brought by the agency itself.  The fundamental character of the claim as a 
public enforcement action is the same in both instances.  We conclude that 
California‘s public policy prohibiting waiver of PAGA claims, whose sole purpose 
is to vindicate the Labor and Workforce Development Agency‘s interest in 
enforcing the Labor Code, does not interfere with the FAA‘s goal of promoting 
arbitration as a forum for private dispute resolution. 
D. 
CLS contends that the PAGA violates the principle of separation of powers 
under the California Constitution.  Iskanian says this issue was not raised in CLS‘s 
answer to the petition for review and is not properly before us.  Because the 
constitutionality of the PAGA is directly pertinent to the issue of whether a PAGA 
waiver is contrary to state public policy, and because the parties have had a 
reasonable opportunity to brief this issue, we will decide the merits of this 
question.  (See Cal. Rules of Court, rule 8.516(b)(1), (2).)   
The basis of CLS‘s argument is found in County of Santa Clara v. Superior 
Court (2010) 50 Cal.4th 35 (County of Santa Clara).  There we reconsidered our 
earlier holding in People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d 740 
(Clancy), which appeared to categorically bar public entities from hiring private 
counsel on a contingent fee basis to prosecute public nuisances.  In the context of a 
disputed injunction to close an adult bookstore, this court reasoned that private 
counsel acting as a public prosecutor must be ―absolutely neutral‖ and must 
 
44 
engage in a ―delicate weighing of values‖ that would be upset if the prosecutor had 
a financial interest in the prosecution.  (Id. at pp. 748–749.) 
In County of Santa Clara, we clarified that Clancy‘s ―absolute prohibition 
on contingent-fee arrangements‖ applies only to cases involving a constitutional 
―liberty interest‖ or ―the right of an existing business to continue operation,‖ and 
not to all public nuisance cases.  (County of Santa Clara, supra, 50 Cal.4th at 
p. 56.)  We recognized, as we did in Clancy, that contingent fee representation was 
appropriate in ―ordinary civil cases‖ in which a government entity‘s own 
economic interests were at stake.  (County of Santa Clara, at p. 50; see Clancy, 
supra, 39 Cal.3d at p. 748.)  Whereas the suit in Clancy was akin to a criminal 
prosecution, with possible criminal penalties and severe civil penalties, we said the 
public nuisance suit at issue in County of Santa Clara, which involved abatement 
of lead paint, fell somewhere in between an ordinary civil case and a criminal 
prosecution.  (County of Santa Clara, at p. 55.)  We held that for such cases, the 
interest in prosecutorial neutrality is sufficiently protected when private counsel, 
although having a pecuniary interest in litigation, is ―subject to the supervision and 
control of government attorneys‖ so that ―the discretionary decisions vital to an 
impartial prosecution are made by neutral attorneys.‖  (Id. at p. 59.) 
CLS contends that the PAGA runs afoul of our holding in County of Santa 
Clara by authorizing financially interested private citizens to prosecute claims on 
the state‘s behalf without governmental supervision.  CLS further contends that 
because County of Santa Clara dealt with regulation of the legal profession, which 
is the province of this court, the PAGA violates the principle of separation of 
powers under the California Constitution.  (See Cal. Const., art. III, § 3; Merco 
Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 731–732.)  We 
disagree. 
 
45 
―[T]he separation of powers doctrine does not create an absolute or rigid 
division of functions.‖  (Lockyer v. City and County of San Francisco (2004) 33 
Cal.4th 1055, 1068.)  Rather, ―[t]he substantial interrelatedness of the three 
branches‘ actions is apparent and commonplace:  the judiciary passes upon the 
constitutional validity of legislative and executive actions, the Legislature enacts 
statutes that govern the procedures and evidentiary rules applicable in judicial and 
executive proceedings, and the Governor appoints judges and participates in the 
legislative process through the veto power.  Such interrelationship, of course, lies 
at the heart of the constitutional theory of ‗checks and balances‘ that the separation 
of powers doctrine is intended to serve.‖  (Superior Court v. County of Mendocino 
(1996) 13 Cal.4th 45, 52–53.) 
In considering CLS‘s challenge, we note that it would apply not only to the 
PAGA but to all qui tam actions, including the California False Claims Act, which 
authorizes the prosecution of claims on behalf of government entities without 
government supervision.  (See Gov. Code, § 12652, subd. (c).)  No court has 
applied the rule in Clancy or County of Santa Clara to such actions, and our case 
law contains no indication that the enactment of qui tam statutes is anything but a 
legitimate exercise of legislative authority.  The Legislature is charged with 
allocating scarce budgetary resources (see Professional Engineers in California 
Government v. Schwarzenegger (2010) 50 Cal.4th 989, 1010–1011), which 
includes the provision of resources to the state executive branch for prosecution 
and law enforcement.  Qui tam actions enhance the state‘s ability to use such 
scarce resources by enlisting willing citizens in the task of civil enforcement.  
Indeed, the choice often confronting the Legislature is not between prosecution by 
a financially interested private citizen and prosecution by a neutral prosecutor, but 
between a private citizen suit and no suit at all.  As noted, the lack of government 
resources to enforce the Labor Code led to a legislative choice to deputize and 
 
46 
incentivize employees uniquely positioned to detect and prosecute such violations 
through the PAGA. 
This legislative choice does not conflict with County of Santa Clara.  Our 
holding in that case applies to circumstances in which a government entity retains 
a private law firm or attorney as outside counsel.  A ―fundamental‖ reason to 
worry about neutrality in that context is that such an attorney, like an attorney 
directly employed by the government, ―has the vast power of the government 
available to him; he must refrain from abusing that power by failing to act 
evenhandedly.‖  (Clancy, supra, 39 Cal.3d at p. 746.)  By contrast, a litigant who 
brings a qui tam action on behalf of the government generally does not have 
access to such power.  The qui tam litigant has only his or her own resources and 
may incur significant cost if unsuccessful.  The PAGA, by deputizing employee 
plaintiffs to enforce the Labor Code on behalf of the Labor and Workforce 
Development Agency, does not present the same risks of abuse as when a city or 
county hires outside counsel to do its bidding. 
Moreover, our rule in County of Santa Clara involves minimal if any 
interference with legislative or executive functions of state or local government.  
The rule simply requires government entities to supervise the attorneys they 
choose to hire to pursue public nuisance actions.  By contrast, a rule disallowing 
qui tam actions would significantly interfere with a legitimate exercise of 
legislative authority aimed at accomplishing the important public purpose of 
augmenting scarce government resources for civil prosecutions. 
Because of these differences, Clancy and County of Santa Clara do not 
apply beyond the context of attorneys hired by government entities as independent 
contractors.  There is no conflict between the rule in those cases and the PAGA.  
Accordingly, we reject CLS‘s argument that the PAGA violates the separation of 
powers principle under the California Constitution. 
 
47 
VI. 
Having concluded that CLS cannot compel the waiver of Iskanian‘s 
representative PAGA claim but that the agreement is otherwise enforceable 
according to its terms, we next consider how the parties will proceed.  Although 
the arbitration agreement can be read as requiring arbitration of individual claims 
but not of representative PAGA claims, neither party contemplated such a 
bifurcation.  Iskanian has sought to litigate all claims in court, while CLS has 
sought to arbitrate the individual claims while barring the PAGA representative 
claim altogether.  In light of the principles above, neither party can get all that it 
wants.  Iskanian must proceed with bilateral arbitration on his individual damages 
claims, and CLS must answer the representative PAGA claims in some forum.  
The arbitration agreement gives us no basis to assume that the parties would prefer 
to resolve a representative PAGA claim through arbitration. 
This raises a number of questions:  (1) Will the parties agree on a single 
forum for resolving the PAGA claim and the other claims?  (2) If not, is it 
appropriate to bifurcate the claims, with individual claims going to arbitration and 
the representative PAGA claim to litigation?  (3) If such bifurcation occurs, should 
the arbitration be stayed pursuant to Code of Civil Procedure section 1281.2?  (See 
Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 388–391 
[California Arbitration Act rather than FAA procedures apply to arbitrations 
brought in California courts].)  The parties have not addressed these questions and 
may do so on remand.  The parties may also address CLS‘s contention that the  
 
48 
PAGA claims are time-barred, as well as Iskanian‘s response that CLS has 
forfeited this contention and cannot raise it on appeal. 
CONCLUSION 
Because the Court of Appeal held that the entire arbitration agreement, 
including the PAGA waiver, should be enforced, we reverse the judgment and 
remand the cause for proceedings consistent with this opinion. 
 
 
 
 
 
 
 
LIU, J. 
 
WE CONCUR: CANTIL-SAKAUYE, C. J. 
 
CORRIGAN, J. 
 
KENNARD, J.* 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________ 
 
* 
Retired Associate Justice of the Supreme Court, assigned by the Chief 
Justice pursuant to article VI, section 6 of the California Constitution.
 
 
 
 
 
 
 
 
 
 
CONCURRING OPINION BY CHIN, J. 
 
I agree that the rule of Gentry v. Superior Court (2007) 42 Cal.4th 443 
(Gentry), which was announced by a bare four-to-three majority of this court, is 
inconsistent with and invalid under the decisions of the United States Supreme 
Court interpreting the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.).  I also 
agree that the class action waiver in this case is not unlawful under the National 
Labor Relations Act, that defendant CLS Transportation Los Angeles, LLC, did 
not waive its right to arbitrate, that the arbitration agreement is invalid insofar as it 
purports to preclude plaintiff Arshavir Iskanian from bringing in any forum a 
representative action under the Private Attorneys General Act of 2004 (PAGA) 
(Lab. Code, § 2698 et seq.), and that this conclusion is not inconsistent with the 
FAA.  However, as explained below, I do not endorse all of the majority‘s 
reasoning and discussion, including its endorsement of dicta in Sonic-Calabasas 
A, Inc. v. Moreno (2013) 57 Cal.4th 1109 (Sonic II).  I therefore concur in the 
judgment. 
 
I.  BOTH GENTRY’S RULE AND SONIC II’S DICTA ARE INVALID UNDER THE 
FAA. 
As noted above, I agree with the majority that Gentry‘s rule may not stand 
under the United States Supreme Court‘s construction of the FAA.  Indeed, for 
that very reason, I joined Justice Baxter‘s well-reasoned dissent in Gentry, which 
explained that neither the FAA nor California law permits courts to ―elevate a 
 
2 
mere judicial affinity for class actions as a beneficial device for implementing the 
wage laws above the policy expressed by both Congress and our own Legislature 
that voluntary individual agreements to arbitrate . . . should be enforced according 
to their terms.‖  (Gentry, supra, 42 Cal.4th at p. 477 (dis. opn. of Baxter, J.).)   
I do not agree, however, that the approach to unconscionability a majority 
of this court described in dicta in Sonic II may ―be squared‖ with the high court‘s 
FAA decisions.  (Maj. opn., ante, at p. 10.)  That approach, as my dissent in Sonic 
II explained, is preempted by the FAA as the high court construed that act in 
AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] 
(Concepcion), American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. 
__ [133 S.Ct. 2304] (Italian Colors), and several other decisions.  (Sonic II, supra, 
57 Cal.4th at pp. 1184-1192 (dis. opn. of Chin, J.).)  Nothing has occurred since 
we issued Sonic II to change my view.   
Indeed, the majority‘s discussion in this case further reveals the invalidity 
under federal law of Sonic II‘s dicta.  According to the majority, under that dicta, 
whether the arbitration procedure to which the parties have agreed is 
unconscionable turns not on whether it permits recovery, but on whether it is, in a 
court‘s view, less ―effective . . . for wage claimants‖ than a ―dispute resolution 
mechanism‖ that includes the procedures and protections ―the Berman statutes‖ 
prescribe.  (Maj. opn., ante, at pp.  9-10.)  However, the high court has established 
that the FAA does not permit courts to invalidate arbitration agreements based on 
the view that the procedures they set forth would ― ‗weaken[] the protections 
afforded in the substantive law to would-be complainants.‘  [Citation.]‖  (Green 
Tree Financial Corp.-Ala. v. Randolph (1990) 531 U.S. 79, 89-90.)  Consistent 
with this principle, in Italian Colors, the court recently held that an arbitration 
agreement may be not invalidated based on proof that its waiver of a 
congressionally approved mechanism — the class action — would make pursuing 
 
3 
a federal antitrust claim prohibitively expensive.  (Italian Colors, supra, 570 U.S. 
at pp. __ [133 S.Ct. at pp. 2310-2312].)  A fortiori, an arbitration agreement may 
not be invalidated based on a court‘s subjective view that the agreement‘s waiver 
of the Berman procedures and protections would render arbitration less 
―effective . . . for wage claimants‖ than a ―dispute resolution mechanism‖ that 
includes those procedures and protections.  According to the high court, the FAA 
is ―a congressional declaration of a liberal federal policy favoring arbitration 
agreements, notwithstanding any state substantive or procedural policies to the 
contrary.‖  (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 
24, italics added.)  To quote Justice Baxter‘s dissent in Gentry, it does not permit 
courts to ―elevate a mere judicial affinity for‖ the Berman dispute resolution 
mechanism ―as a beneficial device for implementing the wage laws above the 
policy expressed by . . . Congress . . . that voluntary individual agreements to 
arbitrate . . . should be enforced according to their terms.‖  (Gentry, supra, 42 
Cal.4th at p. 477 (dis. opn. of Baxter, J.).)  I therefore do not join the majority 
opinion insofar as it suggests that the approach to unconscionability described in 
Sonic II‘s dicta is valid under the FAA.   
II.  THE PAGA WAIVER IS UNENFORCEABLE. 
Under PAGA, an ―aggrieved employee‖ — i.e., ―any person who was 
employed by‖ someone alleged to have violated the Labor Code ―and against 
whom one or more of the alleged violations was committed‖ — may bring a civil 
action against the alleged violator to recover civil penalties for Labor Code 
violations both as to himself or herself and as to ―other current or former 
employees.‖  (Lab. Code, § 2699, subds. (a), (c).)1  As we have explained, an 
                                            
1  
All further unlabeled statutory references are to the Labor Code. 
 
4 
aggrieved employee‘s PAGA action ― ‗is fundamentally a law enforcement 
action‘ ‖ that ―substitute[s] for an action brought by the government itself.‖  (Arias 
v. Superior Court (2009) 46 Cal.4th 969, 986.)  The employee-plaintiff  ―acts as 
the proxy or agent of state labor law enforcement agencies, representing the same 
legal right and interest as those agencies‖ and seeking statutory civil penalties 
―that otherwise would be sought by‖ those agencies.  (Amalgamated Transit 
Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.)  By 
statute, 75 percent of the penalties ―recovered by aggrieved employees‖ under 
PAGA goes to the Labor and Workforce Development Agency, and only 25 
percent goes to ―the aggrieved employees.‖  (§ 2699, subd. (i).)  Accordingly, 
every PAGA action, whether seeking penalties for Labor Code violations as to 
only one aggrieved employee — the plaintiff bringing the action — or as to other 
employees as well, is a representative action on behalf of the state.   
As relevant, the arbitration agreement here provides:  ―[E]xcept as 
otherwise required under applicable law, (1) EMPLOYEE and COMPANY 
expressly intend and agree that class action and representative action procedures 
shall not be asserted, nor will they apply, in any arbitration pursuant to this 
Policy/Agreement; (2) EMPLOYEE and COMPANY agree that each will not 
assert class action or representative action claims against the other in arbitration 
or otherwise; and (3) each of EMPLOYEE and COMPANY shall only submit 
their own, individual claims in arbitration and will not seek to represent the 
interests of any other person.‖  (Italics added.)  Because, as explained above, all 
PAGA claims are representative actions, these provisions purport to preclude 
Iskanian from bringing a PAGA action in any forum.  To this extent, the 
arbitration provision is, for reasons the majority states, invalid under California 
law.  (Maj. opn., ante, at pp. 34-36.) 
 
5 
I agree with the majority that this conclusion is not inconsistent with the 
FAA, but my reasoning differs from the majority‘s.  Although the FAA generally 
requires enforcement of arbitration agreements according to their terms, the high 
court has recognized an exception to this requirement for ―a provision in an 
arbitration agreement forbidding the assertion of certain statutory rights.‖  (Italian 
Colors, supra, 570 U.S. at p. __ [133 S.Ct. at p. 2310]; see Mitsubishi Motors v. 
Soler Chrysler–Plymouth (1985) 473 U.S. 614, 637 [―so long as the prospective 
litigant effectively may vindicate its statutory cause of action in the arbitral forum, 
the statute will continue to serve both its remedial and deterrent function‖].)  
Accordingly, the conclusion that the arbitration agreement here is invalid insofar 
as it forbids Iskanian from asserting his statutory right under PAGA in any forum 
does not run afoul of the FAA. 
The majority takes a different route in finding no preemption.  It first 
correctly observes that the FAA applies by its terms only to provisions in contracts 
― ‗to settle by arbitration a controversy thereafter arising out of such contract.‘ ‖  
(Maj. opn., ante, at p. 37, quoting 9 U.S.C. § 2.)  Based on this language, the 
majority then declares that a PAGA claim ―lies‖ completely ―outside the FAA‘s 
coverage because it is not a dispute between an employer and an employee arising 
out of their contractual relationship.‖  (Maj. opn., ante, at p. 40.)  It is, instead, 
merely ―a dispute between an employer and the state, which alleges directly or 
through its agents — either the Labor and Workforce Development Agency or 
aggrieved employees — that the employer has violated the Labor Code.‖  (Maj. 
opn., ante, at p. 40.)   
For several reasons, I question the majority‘s analysis.  First, I disagree that 
a PAGA claim is not ―a dispute between an employer and an employee arising out 
of their contractual relationship.‖  (Maj. opn., ante, at p. 40.)  As noted above, a 
person may not bring a PAGA action unless he or she is ―an aggrieved employee‖ 
 
6 
(§ 2699, subd. (a)), i.e., a person ―who was employed by‖ the alleged Labor Code 
violator and ―against whom‖ at least one of the alleged violations ―was 
committed‖ (§ 2699, subd. (c)).  In other words, as the majority explains, by 
statute, only ―employees who ha[ve] been aggrieved by the employer‖ may bring 
PAGA actions.  (Maj. opn., ante, at p. 41.)  Thus, although the scope of a PAGA 
action may extend beyond the contractual relationship between the plaintiff-
employee and the employer — because the plaintiff may recover civil penalties for 
violations as to other employees — the dispute arises, first and fundamentally, out 
of that relationship.   
Second, to find no FAA preemption in this case, we need not adopt a novel 
theory, devoid of case law support, that renders the FAA completely inapplicable 
to PAGA claims.  Under the majority‘s view that PAGA claims ―lie[] outside the 
FAA‘s coverage‖ because they are not disputes between employers and employees 
―arising out of their contractual relationship‖ (maj. opn., ante, at p. 40), the state 
may, without constraint by the FAA, simply ban arbitration of PAGA claims and 
declare agreements to arbitrate such claims unenforceable.  I do not subscribe to 
that view, for which the majority offers no case law support.  By contrast, as 
explained above, there is case law support — from the high court itself — for the 
conclusion that the arbitration agreement here is unenforceable because it purports 
to preclude Iskanian from bringing a PAGA action in any forum.  We should limit 
ourselves to an analysis firmly grounded in high court precedent, rather than 
needlessly adopt a novel theory that renders the FAA completely inapplicable. 
Third, contrary to the majority‘s assertion, EEOC v. Waffle House, Inc. 
(2002) 534 U.S. 279 (Waffle House), to the extent it is relevant, actually does 
―suggest[] that the FAA preempts‖ the majority‘s rule.  The question there was 
whether, under the FAA, an agreement between an employer and an employee to 
arbitrate employment-related disputes precluded the Equal Employment 
 
7 
Opportunity Commission (EEOC), which was not ―a party to‖ the arbitration 
agreement and had never ―agreed to arbitrate its claims,‖ from pursuing victim-
specific relief in a judicial enforcement action.  (Waffle House, supra, at p. 294.)  
The court said ―no,‖ explaining that nothing in the FAA ―place[s] any restriction 
on a nonparty‘s choice of a judicial forum‖ (Waffle House, supra, at p. 289) or 
requires a ―nonparty‖ to arbitrate claims it has not agreed to arbitrate (id. at p. 
294).  Because Iskanian is a party to the arbitration agreement in this case, this 
holding is inapposite.  What is apposite in Waffle House is the court‘s statement 
that the FAA ―ensures the enforceability of private agreements to arbitrate.‖  
(Waffle House, supra, 534 U.S. at p. 289.)  This statement, which simply reiterates 
what the court has said ―on numerous occasions‖ (Stolt-Nielsen S.A. v. 
AnimalFeeds International Corp. (2010) 559 U.S. 662, 682), casts considerable 
doubt on the majority‘s view that the FAA permits either California or its courts to 
declare private agreements to arbitrate PAGA claims categorically unenforceable.     
Finally, under other high court precedent, there is good reason to doubt the 
majority‘s suggestion that the FAA places no limit on ―the ability of states to 
enhance their public enforcement capabilities by enlisting willing employees in 
qui tam actions.‖  (Maj. opn., ante, at p. 41.)  When the high court recently held in 
Concepcion that the FAA prohibits courts from conditioning enforcement of 
arbitration agreements on the availability of classwide arbitration procedures, even 
if such procedures ―are necessary to prosecute small-dollar claims that might 
otherwise slip through the legal system,‖ it explained:  ―States cannot require a 
procedure that is inconsistent with the FAA, even if it is desirable for unrelated 
reasons.‖  (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1753].)  In earlier 
decisions, the high court broadly explained that the FAA ―is a congressional 
declaration of a liberal federal policy favoring arbitration agreements, 
notwithstanding any state substantive or procedural policies to the contrary‖ 
 
8 
(Moses H. Cone Hospital v. Mercury Constr. Corp., supra, 460 U.S. at p. 24, 
italics added), which ―withdr[aws] the power of the states to require a judicial 
forum for the resolution of claims which the contracting parties agreed to resolve 
by arbitration‖ (Southland Corp. v. Keating (1984) 465 U.S. 1, 10).  Thus, ―if 
contracting parties agree to include‖ certain claims ―within the issues to be 
arbitrated, the FAA ensures that their agreement will be enforced according to its 
terms even if a rule of state law would otherwise exclude such claims from 
arbitration.‖  (Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 
58, italics added.)  In other words, ―[w]hen state law prohibits outright the 
arbitration of a particular type of claim, the analysis is straightforward: The 
conflicting rule is displaced by the FAA.‖  (Concepcion, supra, 563 U.S. at p. __ 
[131 S.Ct. at p. 1747].)  These binding pronouncements indicate that the FAA 
may, in fact, place a limit on the ability of a state, for policy reasons, to ―enhance‖ 
its public enforcement capabilities by authorizing employees who have 
contractually agreed to arbitrate their statutory PAGA claims to ignore that 
agreement and pursue those claims in court as the state‘s ―representatives.‖  (Maj. 
opn., ante, at p. 41.)  
However, as explained above, requiring an arbitration provision to preserve 
some forum for bringing PAGA actions does not exceed that limit.  I therefore 
concur in the judgment. 
 
CHIN, J. 
I CONCUR: 
BAXTER, J. 
 
 
 
 
 
  
 
 
 
 
 
CONCURRING AND DISSENTING OPINION BY WERDEGAR, J. 
 
 
I join the court‘s conclusions as to Arshavir Iskanian‘s Private Attorneys 
General Act claims, which are not foreclosed by his employment contract or the 
Federal Arbitration Act (FAA).  I disagree with the separate holding that the 
mandatory class action and class arbitration waivers in Iskanian‘s employment 
contract are lawful.  Eight decades ago, Congress made clear that employees have 
a right to engage in collective action and that contractual clauses purporting to 
strip them of those rights as a condition of employment are illegal.  What was true 
then is true today.  I would reverse the Court of Appeal‘s decision in its entirety. 
I. 
Employment contracts prohibiting collective action, first known as 
― ‗ironclads,‘ ‖ date to the 19th century.  (Ernst, The Yellow-dog Contract and 
Liberal Reform, 1917-1932 (1989) 30 Lab. Hist. 251, 252 (The Yellow-dog 
Contract).)  Confronted with collective efforts by workers to agitate for better 
terms and conditions of employment, employers responded by conditioning 
employment on the promise not to join together with fellow workers in a union.  
(Lincoln Union v. Northwestern Co. (1949) 335 U.S. 525, 534; Silverstein, 
Collective Action, Property Rights and Law Reform: The Story of the Labor 
Injunction (1993) 11 Hofstra Lab. L.J. 97, 100.)  This practice was ―so obnoxious 
 
2 
to workers that they gave these required agreements the name of ‗yellow dog 
contracts.‘ ‖  (Lincoln Union, at p. 534.) 
―Recognizing that such agreements in large part represent the superior 
economic position of the employer by virtue of which the theoretical freedom of 
an employee to refuse assent was illusory, and that such agreements therefore 
emptied of meaning the ‗right of collective bargaining,‘ ‖ state legislatures and 
Congress sought to stem the practice, enacting statutes that prohibited 
conditioning employment on a compulsory contractual promise not to unionize.  
(Frankfurter & Greene, The Labor Injunction (1930) p. 146.)  These efforts were 
initially unsuccessful; first state courts, and then the Lochner-era1 Supreme Court, 
struck down the bans as an infringement on liberty of contract.  (Coppage v. 
Kansas (1915) 236 U.S. 1, 9-14; Adair v. United States (1908) 208 U.S. 161, 172-
176; Frankfurter & Greene, at pp. 146-148; Ernst, The Yellow-dog Contract, 
supra, 30 Lab. Hist. at p. 252.)  When the Supreme Court gave a clear imprimatur 
to yellow-dog contracts in Hitchman Coal & Coke Co. v. Mitchell (1917) 245 U.S. 
229, upholding an injunction against collective organizing efforts on the ground 
that the contracts granted employers a property right secure from union 
interference, the use of contractual bans on collective action blossomed.  
(Frankfurter & Greene, at pp. 148-149; Ernst, at pp. 253-256.)  Through the use of 
such terms, ―[a]ny employer willing to compel employee acquiescence could 
effectively foreclose all union organizational efforts directed at his business.‖  
(Winter, Jr., Labor Injunctions and Judge-made Labor Law: The Contemporary 
Role of Norris-LaGuardia (1960) 70 Yale L.J. 70, 72, fn. 14.) 
                                            
1  
Lochner v. New York (1905) 198 U.S. 45. 
 
3 
In the 1930‘s, Congress tried again to outlaw contractual bans on collective 
action.  A bill drafted by then-Professor Felix Frankfurter and others2 was swiftly 
and overwhelmingly approved in both houses and enacted as the Norris-LaGuardia 
Act of 1932.  (Bremner, The Background of the Norris-La Guardia Act (1947) 9 
The Historian 171, 174-175.)  Section 2 of the act declared as the public policy of 
the United States employees‘ right to engage in collective activity, free from 
employer restraint or coercion:  ―Whereas under prevailing economic conditions, 
developed with the aid of governmental authority for owners of property to 
organize in the corporate and other forms of ownership association, the individual 
unorganized worker is commonly helpless to exercise actual liberty of contract 
and to protect his freedom of labor, and thereby to obtain acceptable terms and 
conditions of employment, wherefore, . . . it is necessary that he have full freedom 
of association, self-organization, and designation of representatives of his own 
choosing, to negotiate the terms and conditions of his employment, and that he 
shall be free from the interference, restraint, or coercion of employers of labor, or 
their agents, in the designation of such representatives or in self-organization or in 
other concerted activities for the purpose of collective bargaining or other mutual 
aid or protection . . . .‖  (29 U.S.C. § 102, italics added.)  Congress recognized the 
inability of a ―single laborer, standing alone, confronted with such far-reaching, 
overwhelming concentration of employer power‖ to ―negotiate or to exert any 
influence over the fixing of his wages or the hours and conditions of his labor,‖ the 
necessary corrective to be ―[t]he right of wage earners to organize and to act 
                                            
2  
See Frankfurter & Greene, The Labor Injunction, supra, page 226 and 
footnote 61; id. at pages 279-288 (draft bill); Fischl, Self, Others, and Section 7: 
Mutualism and Protected Protest Activities Under the National Labor Relations 
Act (1989) 89 Colum. L.Rev. 789, 846-849. 
 
4 
jointly in questions affecting wages [and the] conditions of labor,‖ and, as the 
solution, ―specific legislative action‖ to preserve workers‘ ―freedom in association 
to influence the fixing of wages and working conditions.‖  (Sen.Rep. No. 163, 72d 
Cong., 1st Sess., p. 9 (1932); see generally id., at pp. 9-14.)  Arguing for passage, 
the act‘s cosponsor, Senator George Norris, explained the measure was needed to 
end a regime in which ―the laboring man . . . . must singly present any grievance 
he has.‖  (Remarks of Sen. Norris, Debate on Sen. No. 935, 72d Cong., 1st Sess., 
75 Cong. Rec. 4504 (1932).) 
To that end, section 3 of the Norris-LaGuardia Act was ―designed to outlaw 
the so-called yellow-dog contract.‖  (H.R.Rep. No. 669, 72d Cong., 1st Sess., p. 6 
(1932); accord, Sen.Rep. No. 163, supra, at pp. 15-16.)  ―[T]he vice of such 
contracts, which are becoming alarmingly widespread,‖ was that they rendered 
collective action and unions effectively impossible; ―[i]ndeed, that is undoubtedly 
their purpose, and the purpose of the organizations of employers opposing‖ the 
Norris-LaGuardia Act.  (H.R.Rep. No. 669, at p. 7.)  If such contracts, requiring a 
waiver of workers‘ rights of free association, were given enforcement in the 
courts, ―collective action would be impossible so far as the employee is concerned 
by virtue of the necessity of signing the character of contract condemned, which 
prevents a man from joining with his fellows for collective action; and the 
statement . . . that ‗it has long been recognized that employees are entitled to 
organize for the purpose of securing the redress of grievances and to promote 
agreements with employers relating to rates of pay and conditions of work‘ would 
become an empty statement of historical fact.‖  (Ibid., quoting Texas & N. O. R. 
Co. v. Ry. Clerks (1930) 281 U.S. 548, 570.)  Accordingly, the Norris-LaGuardia 
Act declared yellow dog contracts ―to be contrary to the public policy of the 
United States‖ and unenforceable in any court of the United States.  (29 U.S.C. 
§ 103.) 
 
5 
Three years later, Congress expanded on these proscriptions in the National 
Labor Relations Act (commonly known as the Wagner Act after its author, Sen. 
Robert F. Wagner).  (Pub.L. No. 74-198 (July 5, 1935) 49 Stat. 449, codified as 
amended at 29 U.S.C. §§ 151-169.)  The public policy underlying the act was the 
same as that motivating the Norris-LaGuardia Act: ―protecting the exercise by 
workers of full freedom of association, self-organization, and designation of 
representatives of their own choosing, for the purpose of negotiating the terms and 
conditions of their employment or other mutual aid or protection.‖  (29 U.S.C. 
§ 151.)  To ensure that end, the Wagner Act granted employees, inter alia, ―the 
right . . . to engage in . . . concerted activities for the purpose of collective 
bargaining or other mutual aid or protection . . . .‖  (29 U.S.C. § 157 (also known 
as section 7).)3  Employers were forbidden ―to interfere with, restrain, or coerce 
employees in the exercise of‖ their right to engage in concerted, collective activity.  
(29 U.S.C. § 158(a)(1).)  Inter alia, these provisions were a ―logical and imperative 
extension of that section of the Norris-La Guardia Act which makes the yellow-
dog contract unenforceable in the Federal courts.‖  (Nat. Labor Relations Act of 
1935, Hearings before House Com. on Labor on H.R. No. 6288, 74th Cong., 1st 
Sess., at p. 14 (1935), statement of Sen. Wagner; accord, remarks of Sen. Wagner, 
Debate on Sen. No. 1958, 74th Cong., 1st Sess., 79 Cong. Rec. 7570 (daily ed. 
May 15, 1935); see H.R.Rep. No. 1147, 74th Cong., 1st Sess., supra, at p. 19.)4  
                                            
3  
Congress took to heart, as it had in the Norris-LaGuardia Act, Chief Justice 
Taft‘s admonition that because a ―single employee was helpless in dealing with an 
employer,‖ collective action ―was essential to give laborers [the] opportunity to 
deal on equality with their employer.‖  (Amer. Foundries v. Tri-City Council 
(1921) 257 U.S. 184, 209, quoted in H.R.Rep. No. 1147, 74th Cong., 1st Sess., 
p. 10 (1935) and H.R.Rep. No. 669, 72d Cong., 1st Sess., supra, at p. 7.)  
4  
Senator Wagner‘s ―intent was the intent of Congress, for unlike most other 
major legislation, this statute was the product of a single legislator.  Although 
 
(footnote continued on next page) 
 
6 
Recognizing as clear ―the legality of collective action on the part of employees in 
order to safeguard their proper interests,‖ the post-Lochner Supreme Court now 
upheld against constitutional challenge Congress‘s ―safeguard‖ of this right.  
(Labor Board v. Jones & Laughlin (1937) 301 U.S. 1, 33-34.) 
In the years since the Wagner Act‘s passage, the Supreme Court, Courts of 
Appeals, and National Labor Relations Board have conclusively established that 
the right to engage in collective action includes the pursuit of actions in court.  
(Eastex, Inc. v. NLRB (1978) 437 U.S. 556, 565-566 [the Wagner Act‘s ― ‗mutual 
aid or protection‘ clause protects employees from retaliation by their employers 
when they seek to improve working conditions through resort to administrative 
and judicial forums‖]; Brady v. National Football League (8th Cir. 2011) 644 F.3d 
661, 673 [―a lawsuit filed in good faith by a group of employees to achieve more 
favorable terms or conditions of employment is ‗concerted activity‘ under § 7‖ of 
the Wagner Act]; Mohave Electric Cooperative (1998) 327 NLRB 13, 18, 
enforced by Mohave Elec. Co-op., Inc. v. N.L.R.B. (D.C. Cir. 2000) 206 F.3d 
1183, 1188-1189 [same]; Altex Ready Mixed Concrete Corp. (1976) 223 NLRB 
696, 699-700, enforced by Altex Ready Mixed Concrete Corp. v. N.L.R.B. (5th 
Cir.) 542 F.2d 295, 297 [same]; Leviton Manufacturing Company, Inc. v. N.L.R.B. 
(1st Cir. 1973) 486 F.2d 686, 689 [same].)  This right extends to the filing of wage 
and hour class actions (United Parcel Service, Inc. (1980) 252 NLRB 1015, 1018, 
enforced by N.L.R.B. v. United Parcel Service, Inc. (6th Cir. 1982) 677 F.2d 421), 
                                                                                                                                                       
 
(footnote continued from previous page) 
 
Wagner received assistance from various sources, he fully controlled the bill‘s 
contents from introduction to final passage.‖  (Morris, Collective Rights as Human 
Rights: Fulfilling Senator Wagner’s Promise of Democracy in the Workplace—
The Blue Eagle Can Fly Again (2005) 39 U.S.F. L.Rev. 701, 709.) 
 
7 
including wage class actions filed by former employees like Iskanian (see Harco 
Trucking, LLC (2005) 344 NLRB 478, 482).  The Wagner Act thus prohibits, as an 
unfair labor practice, employer interference with the ability of current or former 
employees to join collectively in litigation. 
II. 
Today‘s class waivers are the descendants of last century‘s yellow dog 
contracts.  (See D.R. Horton & Cuda (Jan. 3, 2012) 357 NLRB No. 184, p. 6.)  
CLS Transportation‘s adhesive form contract includes a clause prohibiting 
Iskanian, like all its employees, from pursuing class or representative suits or class 
arbitrations.5  Thus, Iskanian may not file collectively with fellow employees a 
suit or an arbitration claim challenging any of CLS‘s employment practices or 
policies.  Patently, the effect of the clause is to prevent employees from making 
common cause to enforce rights to better wages and working conditions.  In this, 
the clause is indistinguishable from the yellow dog contracts prohibited by the 
Norris-LaGuardia and Wagner Acts.  Indeed, the whole point of protecting a right 
to collective action is to allow employees to do precisely what CLS 
Transportation‘s clause forbids—band together as a group to peaceably assert 
rights against their employer. 
                                            
5  
The clause provides: ―[E]xcept as otherwise required under applicable law, 
(1) EMPLOYEE and COMPANY expressly intend and agree that class action and 
representative action procedures shall not be asserted, nor will they apply, in any 
arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE and COMPANY 
agree that each will not assert class action or representative action claims against 
the other in arbitration or otherwise; and (3) each of EMPLOYEE and 
COMPANY shall only submit their own, individual claims in arbitration and will 
not seek to represent the interests of any other person.‖  (―Proprietary Information 
and Arbitration Policy/Agreement,‖ ¶ 16(b) (Iskanian‘s contract).) 
 
8 
That the class waiver is without effect necessarily follows.  An employer 
may not by contract require an employee to renounce rights guaranteed by the 
Wagner Act (Nat. Licorice Co. v. Labor Board (1940) 309 U.S. 350, 359-361; see 
id. at p. 364 [―employers cannot set at naught the National Labor Relations Act by 
inducing their workmen to agree not to demand performance of the duties which it 
imposes‖]), and this includes a contract clause requiring an employee to resolve 
disputes in individual, binding arbitration.  Such a clause ―is the very antithesis of 
collective bargaining [and] . . . impose[s] a restraint upon collective action.‖  
(National Labor Relations Board v. Stone (7th Cir. 1942) 125 F.2d 752, 756; see 
Barrow Utilities & Electric (1992) 308 NLRB 4, 11, fn. 5 [―The law has long been 
clear that all variations of the venerable ‗yellow dog contract‘ are invalid . . . .‖].)  
The restriction in Iskanian‘s contract thus directly contravenes federal statutory 
labor law and is invalid on its face.  A contract clause that violates the Wagner Act 
is unenforceable.  (Kaiser Steel Corp. v. Mullins (1982) 455 U.S. 72, 83-86; J. I. 
Case Co. v. Labor Board (1944) 321 U.S. 332, 337 [private contracts that conflict 
with the Wagner Act ―obviously must yield or the Act would be reduced to a 
futility‖].)  Iskanian may not be prevented, on the basis of his contract, from 
proceeding with a putative class action. 
III. 
Notwithstanding this authority, CLS Transportation invokes the FAA as 
grounds for upholding the class waiver. 
In the early part of the 20th century, merchants faced judicial hostility to 
predispute arbitration agreements they entered with their fellow merchants; 
routinely, the courts declined to enforce such agreements, relying on the common 
law rule that specific enforcement of agreements to arbitrate was unavailable.  
(H.R.Rep. No. 96, 68th Cong., 1st Sess., pp. 1-2 (1924); Wasserman, Legal 
Process in a Box, or What Class Action Waivers Teach Us About Law-making 
 
9 
(2012) 44 Loy. U. Chi. L.J. 391, 395.)  In 1925, Congress enacted the FAA in 
response.  Its purpose was to have arbitration agreements ―placed upon the same 
footing as other contracts.‖  (H.R.Rep. No. 96, at p. 1) 
Section 2 of the FAA, its ―primary substantive provision‖ (Moses H. Cone 
Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24), makes this point 
explicit:  An arbitration agreement ―shall be valid, irrevocable, and enforceable, 
save upon such grounds as exist at law or in equity for the revocation of any 
contract‖ (9 U.S.C. § 2, italics added).  Here, we deal with a provision—the 
waiver of the statutorily protected right to engage in collective action—that would 
be unenforceable in any contract, whether as part of an arbitration clause or 
otherwise.  The FAA codifies a nondiscrimination principle; ―[a]s the ‗saving 
clause‘ in § 2 indicates, the purpose of Congress in 1925 was to make arbitration 
agreements as enforceable as other contracts, but not more so.‖  (Prima Paint v. 
Flood & Conklin (1967) 388 U.S. 395, 404, fn. 12.)  That purpose is not upset by 
precluding, in arbitration clauses and employment contracts alike, mandatory class 
waivers forfeiting the right to engage in collective action, a right foreshadowed by 
section 3 of the Norris-LaGuardia Act and guaranteed by section 7 of the Wagner 
Act.  Accordingly, there is no conflict between the FAA and the Norris-LaGuardia 
and Wagner Acts, nor is there anything in the FAA that would permit disregard of 
the substantive rights guaranteed by those later enactments. 
Were one to perceive a conflict, the express text of the Norris-LaGuardia 
Act would resolve it.  The 1932 act supersedes prior law, including any contrary 
provisions in the 1925 FAA:  ―All acts and parts of acts in conflict with the 
provisions of this chapter are repealed.‖  (29 U.S.C. § 115.)  The effect of this 
provision, in combination with section 3 (29 U.S.C. § 103) banning yellow dog 
contracts and the FAA‘s section 2 (9 U.S.C. § 2), subjecting arbitration 
agreements to the same limits as other contracts, is to render equally 
 
10 
unenforceable contractual obligations to forswear collective action in regular 
employment agreements and in employment arbitration agreements. 
Brief reflection on the purposes underlying the Norris-LaGuardia Act and 
Wagner Act demonstrates why this must be so.  A strike for better wages and 
working conditions is core protected activity.  (Labor Board v. Erie Resistor Corp. 
(1963) 373 U.S. 221, 233-235; Automobile Workers v. O’Brien (1950) 339 U.S. 
454, 456-457.)  So too is a walkout.  (Labor Bd. v. Washington Aluminum Co. 
(1962) 370 U.S. 9, 14-17; N.L.R.B. v. McEver Engineering, Inc. (5th Cir. 1986) 
784 F.2d 634, 639; Vic Tanny Intern., Inc. v. N.L.R.B. (6th Cir. 1980) 622 F.2d 
237, 240-241.)  But the expressly declared fundamental purpose of the Wagner 
Act is to minimize industrial strife.  (29 U.S.C. § 151 [―[P]rotection by law of the 
right of employees to organize and bargain‖ is necessary to ―promote[] the flow of 
commerce by removing certain recognized sources of industrial strife and unrest‖]; 
see Brooks v. Labor Board (1954) 348 U.S. 96, 103 [―The underlying purpose of 
[the Wagner Act] is industrial peace.‖]; Atleson, Values and Assumptions in 
American Labor Law (1983) p. 40 [―The most common argument in favor of the 
Wagner Act was that it would reduce industrial strife.‖].)  The Wagner Act ―seeks, 
to borrow a phrase of the United States Supreme Court, ‗to make the appropriate 
collective action (of employees) an instrument of peace rather than of strife.‘ ‖  
(H.R.Rep. No. 1147, 74th Cong., 1st Sess., supra, at p. 9.)  If a class waiver 
provision in an arbitration agreement were deemed enforceable, Iskanian and other 
employees would be protected if they elected to protest through strikes or 
walkouts but precluded from resolving grievances through peaceable collective 
action—a result precisely opposite to the reduction in industrial strife at the heart 
of the Wagner Act‘s goals.  Congress would not have favored less peaceable 
means over more peaceable ones. 
 
11 
Alternatively, if the device of inserting a collective action ban in an 
arbitration clause were enough to insulate the ban from the Norris-LaGuardia and 
Wagner Acts‘ proscriptions, employers could include in every adhesive 
employment contract a requirement that all disputes and controversies, not just 
wage and hour claims, be resolved through arbitration and thus effectively ban the 
full range of collective activities Congress intended those acts to protect.  Such a 
purported harmonizing of the various acts would gut the labor laws; the right to 
― ‗collective action would be a mockery.‘ ‖  (H.R.Rep. No. 669, 72d Cong., 1st 
Sess., supra, at p. 7.)  When Congress invalidated yellow dog contracts and 
protected the right to engage in collective action, it could not have believed it was 
conveying rights enforceable only at the grace of employers, who could at their 
election erase them by the simple expedient of a compelled waiver inserted in an 
arbitration agreement. 
CLS Transportation argues AT&T Mobility LLC v. Concepcion (2011) 563 
U.S. 321 [179 L.Ed.2d 742, 131 S.Ct. 1740] and CompuCredit Corp. v. 
Greenwood (2012) 565 U.S. ___ [181 L.Ed.2d. 586, 132 S.Ct. 665] save its class 
waiver.  Neither does. 
Concepcion considered whether as a matter of obstacle preemption the 
FAA foreclosed a state-law unconscionability rule applicable to class waivers in 
consumer contracts.  (AT&T Mobility LLC v. Concepcion, supra, 563 U.S. at p. 
___ [131 S.Ct. at p. 1746].)  It did not speak to the considerations entailed in 
reconciling the FAA with other coequal federal statutes.  Nor did it address any of 
the particulars of Congress‘s subsequent labor legislation codifying employees‘ 
substantive rights to engage in collective action, rights not shared by consumers. 
CompuCredit Corp. v. Greenwood, supra, 565 U.S. ___ [132 S.Ct. 665] is 
similarly of no assistance.  There, the Supreme Court reaffirmed that to determine 
whether the FAA‘s presumption in favor of enforcing arbitration clauses applies to 
 
12 
a given claim, one must ask whether the presumption has been ― ‗overridden by a 
contrary congressional command‘ ‖ in other federal law.  (Id. at p. ___ [132 S.Ct. 
at p. 669].)  The claims at issue there arose under a federal law that guaranteed 
consumers notice of a ― ‗ ―right to sue.‖ ‘ ‖  (Ibid., quoting 15 U.S.C. § 1679c(a).)  
Had Congress intended to preclude arbitration as a suitable forum under the 
applicable act, ―it would have done so in a manner less obtuse‖ than one offhand 
reference to a right to sue.  (CompuCredit, at p. ___ [132 S.Ct. at p. 672].)  In 
contrast, the Norris-LaGuardia Act and Wagner Act present no similar difficulties 
for discerning a contrary congressional command.  Such a command may be 
evident from ―the text of the [other statute], its legislative history, or an ‗inherent 
conflict‘ between arbitration and the [other statute‘s] underlying purposes.‖  
(Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26.)  Each such 
source supplies support here: the conclusion that class waivers are foreclosed 
arises not from inferences gleaned from a lone phrase, as in CompuCredit, but 
from the explicit text, legislative history and core purpose of the acts, all 
establishing the right to collective action and the illegality of compelled 
contractual waivers of that right.  (See ante, pts. I. & II.) 
Refusing to enforce a National Labor Relations Board order finding a class 
waiver violative of the Wagner Act, a divided Fifth Circuit reached a contrary 
conclusion.  (D.R. Horton, Inc. v. N.L.R.B. (5th Cir. 2013) 737 F.3d 344 (Horton 
II), declining to enforce D.R. Horton & Cuda, supra, 357 NLRB No. 184.)  The 
majority‘s analysis assumed a congressional command superseding the FAA could 
come only from ―the general thrust of the [Wagner Act]—how it operates, its goal 
of equalizing bargaining power‖ (Horton II, at p. 360) and the ―congressional 
intent to ‗level the playing field‘ between workers and employers‖ (id. at p. 361), 
sources the majority found insufficient.  One need not look to such generalized 
and abstract indications.  As discussed, the FAA subordinates arbitration 
 
13 
agreements to generally applicable bars against contract enforcement (9 U.S.C. 
§ 2), and the Wagner Act by its text bars employers from contractually 
conditioning employment on waiver of the right to engage in collective action (29 
U.S.C. §§ 157, 158(a)(1); see Nat. Licorice Co. v. Labor Board, supra, 309 U.S. at 
pp. 359-361). 
Horton II also took comfort in the fact rule 23 of the Federal Rules of Civil 
Procedure (28 U.S.C.), governing class actions, was not adopted until 1966.  
(Horton II, supra, 737 F.3d at p. 362.)  But that the most prevalent current form of 
collective litigation is recent does not mean the Wagner Act at its inception did not 
shield from waiver the right to collective litigation in whatever manner available.  
Collective actions via the common law doctrine of virtual representation, based on 
equity principles, are of much older vintage than rule 23.  (Arias v. Superior Court 
(2009) 46 Cal.4th 969, 988-989 (conc. opn. of Werdegar, J.).)  ―The 74th Congress 
knew well enough that labor‘s cause often is advanced on fronts other than 
collective bargaining and grievance settlement within the immediate employment 
context.  It recognized this fact by choosing, as the language of § 7 makes clear, to 
protect concerted activities for the somewhat broader purpose of ‗mutual aid or 
protection‘ as well as for the narrower purposes of ‗self-organization‘ and 
‗collective bargaining.‘ ‖  (Eastex, Inc. v. NLRB, supra, 437 U.S. at p. 565.)  The 
broad language of the Wagner Act shields concerted activity for mutual aid or 
protection by whatever means pursued, including through peaceable collective 
suits. 
In the end, CLS Transportation‘s argument rests on the notion that the FAA 
should be interpreted to operate as a super-statute, limiting the application of both 
past and future enactments in every particular.  ―[M]en may construe things after 
their fashion/Clean from the purpose of the things themselves.‖  (Shakespeare, 
Julius Caesar, act I, scene 3, lines 34-35.)  So it is with this view of the FAA.  The 
 
14 
text and legislative history of the Norris-LaGuardia and Wagner Acts, passed by 
legislators far closer in time to the FAA than our current vantage point, show no 
such deference.  The right of collective action they codify need not yield. 
I respectfully dissent. 
WERDEGAR, J. 
 
 
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Iskanian v. CLS Transportation Los Angeles, LLC 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 206 Cal.App.4th 949 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S204032 
Date Filed: June 23, 2014 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Robert L. Hess 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Initiative Legal Group, Raul Perez, Katherine W. Kehr; Capstone Law, Glenn A. Danas, Ryan H. Wu; 
Pubic Citizen Litigation Group and Scott L. Nelson for Plaintiff and Appellant. 
 
Julie L. Montgomery and Cynthia L. Rice for California Rural Legal Assistance Foundation as Amicus 
Curiae on behalf of Plaintiff and Appellant. 
 
Altshuler Berzon, Michael Rubin; McGuinn, Hillsman & Palefsky and Cliff Palefsky for Service 
Employees International Union and California Employment Lawyers Association as Amici Curiae on 
behalf of Plaintiff and Appellant. 
 
Rosen Law Firm and Glenn Rosen for California Association of Public Insurance Adjusters as Amicus 
Curiae on behalf of Plaintiff and Appellant. 
 
Amy Bach; The Bernheim Law Firm, Steven Jay Bernheim and Nazo S. Semerjian for United 
Policyholders as Amicus Curiae on behalf of Plaintiff and Appellant. 
 
Sanford Heisler, Janette Wipper, Felicia Medina, Chioma Chukwu; Barbara A. Jones; Melvin Radowitz; 
Della Barnet; and Jennifer Reisch for Timothy Sandquist, AARP, Equal Rights Advocates and The Impact 
Fund as Amici Curiae on behalf of Plaintiff and Appellant. 
 
Arbogast Bowen, David M. Arbogast and Chumahan B. Bowen for Consumer Attorneys of California as 
Amicus Curiae on behalf of Plaintiff and Appellant. 
 
Fox Rothschild, David F. Faustman, Yesenia M. Gallegos, Cristina Armstrong, Namal Tantula; Cole, 
Schotz, Meisel, Forman & Leonard and Leo V. Leyva for Defendant and Respondent. 
 
Jones Day, George S. Howard, Jr., and Mhairi L. Whitton for Retail Litigation Center, Inc., and California 
Retailers Association as Amici Curiae on behalf of Defendant and Respondent. 
 
 
 
 
2 
 
 
 
Page 2 – S204032 – counsel continued 
 
Counsel: 
 
Deborah J. La Fetra for Pacific Legal Foundation as Amicus Curiae on behalf of Defendant and 
Respondent. 
 
Sheppard, Mullin, Richter & Hampton, Richard J. Simmons, Karin Dougan Vogel and Matthew M. Sonne 
for Employers Group as Amicus Curiae on behalf of Defendant and Respondent. 
 
Amar D. Sarwal, Evan P. Schultz and Allen C. Peters for Association of Corporate Counsel as Amicus 
Curiae on behalf of Defendant and Respondent. 
 
Littler Mendelson, Henry D. Lederman, Alexa L. Woerner, Robert Friedman and Edward Berbarie for The 
National Retail Federation and Rent-A-Center, Inc., as Amici Curiae on behalf of Defendant and 
Respondent. 
 
Erika C. Frank; and Fred J. Hiestand for The California Chamber of Commerce and The Civil Justice 
Association of California as Amici Curiae on behalf of Defendant and Respondent. 
 
Horvitz & Levy, Lisa Perrochet, John F. Querio and Felix Shafir for California New Car Dealers 
Association as Amicus Curiae on behalf of Defendant and Respondent. 
 
Mayer Brown, Andrew J. Pincus, Archis A. Parasharami, Scott M. Noveck and Donald M. Falk for The 
Chamber of Commerce of the United State of America as Amicus Curiae on behalf of Defendant and 
Respondent. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
 
Glenn A. Danas 
Capstone Law 
1840 Century Park East, Suite 450 
Los Angeles, CA  90067 
(310) 556-4811 
 
Michael Rubin 
Altshuler Berzon 
177 Post Street, Suite 300 
San Francisco, CA  94108 
(415) 421-7151 
 
David F. Faustman 
Fox Rothschild 
1800 Century Park East, Suite 300 
Los Angeles, CA  90067 
(310) 598-4150 
 
Andrew J. Pincus 
Mayer Brown 
1999 K Street, N.W. 
Washington, DC  20006 
(202) 263-3000