Ninth Circuit Holds the Federal Arbitration Act Does Not Preempt PAGA Representative Action Waiver In Case Against Luxottica Retail Brought By Blumenthal Labor Lawyers

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In Sakkab v. Luxottica Retail North America, Inc. (9th Cir. 9/28/15) ___ F.3d ___, the Ninth Circuit has held that the Federal Arbitration Act (FAA) does not preempt the holding of Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that agreements to waive representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) are not enforceable.

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The Federal Arbitration Act does not preempt Iskanian, which held that that pre-dispute agreements to waive PAGA claims are unenforceable.

On September 28, 2015, the Ninth Circuit Court of Appeals reversed a lower Court's ruling in a class action lawsuit brought by the San Diego Employment law lawyers at Blumenthal Nordrehaug and Bhowmik alleging that Luxottica Retail North America ("Lenscrafters") failed to pay their General Managers overtime wages. The case is entitled Sakkab v. Luxottica Retail North America, Inc., U.S. District Court No. 3:12-CV-00436-GPC; U.S. Court of Appeals For the Ninth Circuit Case No., 13-55184. A copy of the Ninth Circuit's decision can be read by clicking here.

According to the Ninth Circuit's opinion, the lower court granted Luxottica's motion to compel arbitration of all claims contained in Plaintiff's Complaint and dismissed the complaint. Plaintiff appealed, and argued that the waiver of his Private Attorney General Act claim was not enforceable. The Ninth Circuit agreed with Plaintiff's argument and reversed, holding as follows:

The Federal Arbitration Act does not preempt Iskanian, which held that that pre-dispute agreements to waive PAGA claims are unenforceable. First, the Iskanian rule is a "generally applicable contract defense" that bars any waiver of PAGA claims, "regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement."

According to the California's Department of Finance Budget Summary, estimates of the size of California’s underground economy alone operating in violation of California laws range from between $60 billion to $140 billion a year with a corresponding tax loss to the State of between $3 billion and $6 billion annually. According to the Ninth Circuit's opinion, the underlying claim in the Sakkab case was whether Lenscrafters failed to follow California law when the company allegedly decided to not pay their General Managers overtime for their work in excess of eight hours in a day and/or forty hours in a workweek.

PAGA was enacted in 2004 to provide for the enforcement of these labor laws and to compensate for the lack of adequate financing of essential labor law enforcement functions, According to Plaintiff's attorneys, the California Legislature enacted the Private Attorney General Act to permit aggrieved employees to collect civil penalties for the State” for their employers’ violations of California’s labor laws.

According to the Ninth Circuit's opinion, Lenscrafters sought by contract to have the State of California “as an independent sovereign in our federal system” give up its right to enforce the California Labor Code through their appointed representatives.

According to the Ninth Circuit's opinion, given the Court's holding that the PAGA waiver is invalid, the Court remanded to the district court to determine whether the PAGA claims should be arbitrated or litigated in court.

Blumenthal, Nordrehaug & Bhowmik is a California employment law firm with offices located in San Diego, San Francisco, Los Angeles, Riverside, and Sacramento. The firm dedicates its practice to contingency fee employment law work for issues involving overtime pay, wrongful termination, discrimination and other California labor laws. Contact an experienced California employment lawyer today by calling (800) 568-8020.

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Nicholas De Blouw
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