In some states, such as California, unsuspecting employers can find themselves facing millions of dollars in liability for technical violations of an obscure state labor code provision that is inconsistent with the laws of every other state in which the company may operate. These cases often morph into class actions and involve novel allegations regarding overtime, meal and rest breaks, pay statements, and other wage and hour issues. Now, however, employers are breathing a sigh of relief with the Supreme Court’s landmark ruling in AT&T Mobility v. Concepcion.
Arising in the context of consumer litigation, AT&T Mobility involved a wireless carrier that had moved to compel arbitration and further sought to enforce a class action waiver specifying that claims must be brought in an individual capacity and “not as a plaintiff or class member in any purported class or representative pleading.” The 9th Circuit, applying California state law, upheld the lower court’s decision that the class action waiver, by itself, rendered the arbitration agreement unconscionable and thus unenforceable. The U.S. Supreme Court, in a sharply divided 5-4 opinion authored by Justice Antonin Scalia, reversed the 9th Circuit by finding that the Federal Arbitration Act (FAA) preempts California’s law against class action waivers.