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Beware of the Private Attorney General

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By Stephanie Rabiner, Esq. on October 11, 2011 6:43 AM

The Supreme Court received much praise from the business community this year when it upheld the enforceability of consumer class action waivers. Some even believe that the ruling upholds mandatory arbitration agreements in employment contracts.

Unfortunately, this may not be true.

According to a recent California appellate court ruling, the Supreme Court destroyed consumer class actions. However, it did not destroy the private attorney general.

The private attorney general is a nationwide concept. A number of federal and state laws give individuals the ability to file suit in the public interest. Individuals bring representative actions, and in turn are awarded penalties and attorney's fees.

California has specifically enacted the Private Attorneys General Act (PAGA). It allows individuals to file wage and hour lawsuits on behalf of themselves and fellow employees.

A former Ralphs Grocery security guard brought a suit under PAGA. The company argued that she had waived her right to bring employment disputes "on a class action basis [or] as a private attorney general."

The California appellate court ignored the class action clause, but found the private attorney general provision to be unenforceable.

For those of you who operate in California, this decision has an immediate impact. Your employees cannot waive their right to sue under PAGA. A contract cannot prevent a company-wide wage and hour suit.

For those who don't live in California, the analysis might still be relevant within your jurisdiction. Private attorney action suits have a different purpose than class actions. They're meant to enforce laws when states lack the resources to do so themselves. For this reason, other courts may rule in a similar way.

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