As I have written, employees need not file class actions in a court in order to band together to seek overtime monies. Arbitration is a distinct possibility. In the recent case of Franco v Athens Disposal Company, Inc., a California appeals court has held that a trial court erred when it held that a class-action waiver in a company’s arbitration agreement was enforceable. The Company had initially defended by asserting that the employee, a truck driver, was exempt from overtime under the motor carrier exemption, but the Court ruled that this was also for the arbitrator to decide.

The trial court also misinterpreted a decision of the California Supreme Court finding that a class-arbitration waiver was unconscionable when prohibition of relief for all of the putative class members would undermine vindication of the employees’ statutory rights to overtime, which they could not legally waive. The trial court had held that this holding did not apply to a driver’s state-law claims against his employer for not providing meal and rest periods or pay additional compensation for missed meal/rest periods.

The employer had contended the meal and rest period “rights” were subject to waiver. The appeals court held that, as state law required employers to comply with provisions of state Wage Orders, which mandated meal and rest breaks and since the law stated that no provision of law could be set aside by a private agreement, the statutory right to meal and rest periods could not be waived.

In sum, the court ruled that the class-arbitration waiver in the company’s arbitration agreement was unenforceable, where the driver (and other employees) alleged violations of California law regarding meal and rest periods. The court believed that class arbitration would be a more effective way of vindicating the employees’ statutory rights than individual arbitrations, given that the size of the potential individual recovery was small. Finally, the court held that a possible award of attorneys’ fees would not provide a sufficient incentive for an attorney to take an individual case, especially since the allegation was that all hourly employees were subject to the same unlawful conduct.

The lesson is that simply because an employer builds into arbitration agreements (whether found in employee handbooks or freestanding) a waiver of wage-hour (or other) class actions, there is a good chance they will be found unenforceable.