Case-by-Case Arbitration Now Viable in California Pay Disputes

Law Firm Newswire



Sacramento, CA (Law Firm Newswire) September 30, 2014 – Collective legal action has not been eliminated in pay disputes in California, but its role has been diminished. Employers may now insist on case-by-case arbitration.

“In a highly anticipated ruling, the California Supreme Court has decided that California employers may stop their workers from suing jointly for unpaid wages or overtime and alternatively mandate case-by-case arbitration. In essence, the ruling limited collective legal action in wage disputes,” said noted Sacramento business attorney, Deborah Barron.

In a 6-1 ruling, the court indicated that employers may enforce contracts mandating workers to submit all work-related damage claims individually to arbitrators. This permission would, in turn, disallow employees from launching a class action lawsuit through arbitration or court. Many legal experts feel that out-of-court arbitration and restricted class actions are better options for workers. 

“Although the court heavily favors limited actions and out-of-court arbitration, it did preserve another option for workers,” Barron pointed out. “Workers still have the right to join as a class and sue their employer for violating state labor laws. In such situations, the state would collect three quarters of any penalties.”

The ruling is widely regarded as positive for California workers, as it offers them ways to litigate or arbitrate claims on an aggregate basis. Consider, for example, the case of a CLS Transportation limousine driver in Southern California, who alleged that the company failed to provide rest and meal breaks for up to 300 people (Iskanian vs. CLS Transportation, S204032). When a class action violation is too big to ignore, worker’s rights cannot simply be erased.  

The positive but somewhat imprecise ruling follows series of smaller rulings on arbitration contracts. State and federal courts have followed different paths on the issue. The divisive topic may still have further runs in court, as both levels strive to bring some form of stability to the process of holding employers accountable for wage and overtime violations.

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