Class-Action Waivers In Arbitration Agreements Called Into Doubt

In an important decision, the Ninth Circuit Court of Appeals recently ruled that class and collective-action waivers in employment arbitration agreements violate the National Labor Relations Act (“NLRA”) and are unenforceable. In its 2-1 decision in Morris v. Ernst & Young, the Ninth Circuit joined the Seventh Circuit in holding that class-action waivers are illegal because they violate the substantive rights of employees under the NLRA to engage in “concerted activities” for “mutual aid and protection.” Prior to this decision, the Seventh Circuit’s Lewis v. Epic Systems Corp. opinion was the only U.S. Court of Appeals decision in line with the National Labor Relation’s Board (“NLRB”) holding in D.R. Horton.

The Morris decision adds to the uncertainty surrounding class-action waivers in federal courts and makes the U.S. Supreme Court likely to address this issue. While the Ninth and Seventh Circuits have both struck down such provisions, the Second, Fifth, and Eighth Circuits all have upheld class-action waivers. Further adding to uncertainty is the fact that the California Supreme Court has held that the NLRA does not preclude class-action waivers.

It is important to note that the Morris decision addressed a mandatory arbitration agreement. The Ninth Circuit decision leaves open whether a different decision could be reached where the employer provides the employee with a right to opt out of the agreement, thereby making the waiver of class claims voluntary.

* * * *

If you have any questions about your company’s arbitration agreements, including whether they do or should contain class-action waivers, and how the Ninth Circuit’s decision impacts these arbitration agreements, please contact your SFSSW attorney. If you do not presently have an attorney with the firm, please contact Millicent Sanchez, Janet Swerdlow, or David Wimmer.

Comments are closed.