This week, in Konig v. U-Haul Co. of Cal., the Second District issued a ruling that held that an employment contract requiring employees to waive their rights to class or representative actions in arbitrations with the employer was enforceable. U-Haul, the employer, required employees to sign an arbitration agreement and a waiver of “any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity” unless U-Haul agreed to the procedure. An employee bringing a wage and hour claim against U-Haul sought to have the waiver declared unconscionable.
Applying Discover Bank, the Second District noted that, while contractual class-action waivers are unconscionable when they apply to claims that have “predictably . . . small amounts of damages,” wage and hour claims against an employer, such as the one disputed in Konig, are not predictably small. Therefore, the Court reasoned, a class-action waiver was not substantially unconscionable under the standard outlined in Discover Bank.
This case is sure to generate a lot of comment, including some recommendations to employers that they begin adding representative claim and class-action waivers to their employment contracts. However, this opinion will not be the last word on the issue, and I expect more changes to the law in this area soon. Because the California Supreme Court granted a petition to review an opt-in employment arbitration agreement with a similar class-action waiver in April, there will likely be changes to the standard announced in Konig.