Low, Ball & Lynch’s

WEEKLY LAW RESUME

January 26, 2026 Issue   By: Ray Coates

Employment - Validity of Class Action Waiver in Pre-Employment Arbitration Agreement

Gentry v. Superior Court

 (January 19, 2026)

Court of Appeal, Second District

In Discover Bank v. Superior Court (2005) 36 Cal 4th 148, the California Supreme Court invalidated a class action waiver, because it constituted a “consumer contract of adhesion” contained in a credit card application.  This case addresses whether a class action waiver in a pre-employment arbitration agreement is also invalid.

Plaintiff Robert Gentry  was employed by Defendant Circuit City Stores in 1995.  At the time of hiring, Gentry received a packet that included an “Associate Issue Resolution Package” and a copy of Circuit City’s “Dispute Resolution Rules and Procedures.”   These materials explained that employees had various options to resolve employment disputes, including arbitration.  By electing arbitration, the employee agreed to dismiss any civil action.  The agreement to arbitrate also contained a class action waiver.  The packet included a form giving employees 30 days to opt out of the arbitration agreement.  Gentry did not opt out.

In 2002, Gentry filed a class action lawsuit against Circuit City seeking damages for conversion as well as violations of the Labor Code and Business and Professions Code.  Gentry claimed that Circuit City had misclassified him and other employees as exempt managerial/executive employees - not entitled to overtime pay, when they were non-management employees entitled to overtime pay.

After Gentry’s suit was filed, Circuit City filed a petition to compel arbitration.  The trial court granted the petition and ordered Gentry to arbitrate his claims on an individual basis and submit to the class action waiver.  The superior court action was stayed.  Gentry then filed a petition for writ of mandate.  The Second District Court of Appeal denied the petition. The California Supreme Court, however, granted Gentry’s petition for review.  Thereafter, the Supreme Court issued its’ decision in Discover Bank.  The Supreme Court remanded Gentry’s case back to the Court of Appeal  for reconsideration in light of Discover Bank.

The Second District was asked to consider whether the class action waiver in the Circuit City arbitration agreement was an unconscionable provision.  The Court of Appeal held that the provision was not unconscionable.  The Court reasoned that a contract of adhesion is enforceable unless: 1) the terms do not fall within the reasonable expectations of the weaker or adhering party, or 2) the terms are unduly oppressive or unconscionable. As opposed to Discover Bank, where the class action waiver was contained in a bill that the average cardholder was unlikely to read, the class action waiver in the Circuit City agreement was clearly spelled out.  Further, signing the arbitration agreement was not a condition of employment.  Gentry also had 30 days to decide whether to opt out of  the agreement. Therefore, he was free to decide whether or not the advantages of arbitration outweighed the disadvantages.   The Second District held that the class action waiver was not unconscionable.  The Court denied Gentry’s petition for writ of mandate.

COMMENT

The Court of Appeal, distinguishing the facts of this case from the facts in Discover Bank, gives a well-reasoned explanation of what factors must be present to invalidate a class action waiver provision in a pre-employment arbitration agreement.  

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