Several of my blog posts have focused on the case of AT&T Mobility, LLC v. Concepción (“AT&T Mobility“). The U.S. Supreme Court held in Concepcion that California case law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act (“FAA”). The undecided issue is whether a California Supreme Court case, Gentry v. Superior Court, decided before Concepcion, is now good law. Gentry held that most class action waivers in employment agreements are unconscionable. Therein the conflict: A federal Supreme Court ruling on a consumer class action issue and a state Supreme Court ruling on a employee class action issue for overtime.
Generally, the matter of interpreting and enforcing contracts has been left to the states. Specifically, whether a contract is “unconscionable” is a matter of state law. Gentry simply acted within this tradition in finding it unconscionable to deny employees class action status by contract.
I believe the federal interest in the free flow of commerce, and the expansive judicial use of the Commerce Clause to serve that purpose, do not apply to California’s interest in protecting its own employees from contracts denying them class action procedures for wage claims. The California wage and hour laws are the state’s protections of the individual worker against large employer abuses. Denying individual workers a class action remedy effectively removes a major purpose of those laws. Individual employees with relatively small wage claims simply do not have the resources to affect a major shift in employer practices. California rightly allows these employees to use the class action procedures because of the social good it does in convincing employers of the economic wisdom of changing their practices.
It’s time for Congress to reverse the ill-effects of U.S. Supreme Court decision in “Concepcion.” The bad news is the archaic misguided language of the Federal Arbitration Act, and the overreaching decision of the Supreme Court. The good news coming out of this debacle is that a strong citizen led lobby can reverse the damage by legislation in Congress. The beneficial purposes of the FAA can be retained, while leaving to the states their proper roles in deciding when arbitration contracts are unenforceable under common law contract theories.