CLS Transportation of Los Angeles v. Iskanian

Arshavir Iskanian brought this case against CLS Transportation of Los Angeles in part as a class action seeking damages for employees who had not received compensation required by California law, and in part as a representative action under California’s Labor Code Private Attorneys General Act of 2004 (PAGA). PAGA allows an employee who has suffered a violation of California’s labor laws to bring a form of qui tam action on the state’s behalf to recover civil penalties payable mostly to the state and partly to the plaintiff and other victims. CLS defended by invoking a provision of its arbitration agreement with employees prohibiting class actions and also barring any representative claims under PAGA. The California Supreme Court enforced the agreement’s class-action ban.

With respect to the PAGA claim, the court concluded that requiring an employee to waive the right to bring PAGA actions in any forum as a condition of employment violated public policy and that the Federal Arbitration Act (FAA) does not require enforcement of such a waiver. While the court held that PAGA claims must be available in some forum, it did not determine which forum that would be, and remanded for consideration of that issue. CLS Transportation filed a petition for a writ of certiorari seeking review of the issue of whether the FAA preempts a state law rule prohibiting waiver of PAGA representative actions. The petition was denied.