California Supreme Court Disapproves of Class Action Arbitration Waivers in the Employment Context

The California Supreme Court narrowed the circumstances under which class action waivers in an employment arbitration agreement can be enforced. In Gentry v. Superior Court (2007) (S141502) the Court concluded that class action waivers in employment arbitration agreements should not be enforced if a trial court determines that class arbitration would be more effective than individual arbitration in vindicating employee rights. The Court enumerated factors to consider, including whether individual recovery amounts sufficiently incentivized litigation, the risk of retaliation to employees, and the likelihood that other employees are unaware of alleged illegal conduct. Although the Court’s decision was limited to wage and hour violations, it will likely have much broader implications.