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The Daily Journal
May 21, 2018
High court upholds class action waivers

The U.S. Supreme Court's ruling Monday that class action waivers are enforceable reinforces employers' ability to compel one-on-one arbitration in disputes with workers and deals a blow to class actions.

In the past, plaintiffs argued class action waivers used to compel individuals into arbitration were a violation of the National Labor Relations Act's protection for collective relief. The 5-4 opinion written by U.S. Supreme Court Justice Neil Gorsuch adopted a narrow interpretation of that protection.

"The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum," he wrote.

Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. concurred.

In a dissenting opinion, Justice Ruth Bader Ginsburg called the majority view "egregiously wrong," and said it flies in the face of the spirit of U.S. labor law. She pointed to the same language in Section 7 of the labor relations act as the plaintiffs cited, which protects "other concerted activities for the purpose of ... mutual aid or protection," and she agreed the phrase is applicable to class action relief.

"Although the NLRA safeguards, first and foremost, workers' rights to join unions and to engage in collective bargaining, the statute speaks more embracively," she wrote.

In her view, the act was written specifically to allow employees to level the playing field between workers and employers, a sphere outside the original intent of the Federal Arbitration Act.

Justices Stephen G. Breyer, Elena Kagan, and Sonia Sotomayor joined in her dissent. Epic Systems Corp. v. Lewis, 2018 DJDAR 4705 (May 21, 2018).

Glenn Danas of Capstone Law APC in Los Angeles agreed, and said the arbitration act was only used between commercial actors for the first 70 to 80 years of its existence.

"I think that this is a very outcome-determinative ruling that really ignores the realities of the workplace, and really sets aside almost 80 years' worth of a trend, and really the purpose of federal labor laws, which is to allow employees to level the playing field with employers," he said.

"It's a very unfortunate and disappointing opinion for anyone that cares about the rights of American workers," he said, adding that the National Labor Relations Board had been acting under the same logic since 2012.

For the past six years the NLRB held that the maintenance of individual arbitration agreements containing class action waivers violated the National Labor Relations Act.

After the high court decision was issued, the labor relations board issued a statement saying it will evaluate all pending cases moving forward in accordance with the Supreme Court.

However, Danas said the decision was ultimately unsurprising, and other attorneys agreed.

"I think the rationale is something people expected. Whenever you're harmonizing two statutes they're going to do their best to make them consistent," said Michele H. Gehrke of Polsinelli PC.

Gehrke said that not every waiver will automatically hold up, but expects companies to quickly evaluate opportunities to introduce them to guard against class-action litigation.

"The key practical takeaway for employers is that they're going to give serious consideration to mandatory arbitration agreements with class action waivers," she said. "It's an important tool to allow you to avoid that type of litigation, but for claims in California, there's a complication because of PAGA."

Gehrke said she expects a rise in Private Attorney General Act claims, which circumvent arbitration agreements.

She added that class action waivers have faded under the Trump administration as a route of attack for plaintiffs' attorneys due to a sense the waivers would be upheld, a chilling trend that will now extend into the formerly hospitable labor relations board.

The board "is not going to have good grounds to prosecute that in light of the ruling," she said.

Danas expressed a similar sentiment. He said that his cases rarely turn on the issue of class action waivers.

"The decision can be viewed as a final nail in the coffin of attacking class action waivers specifically in employment agreements," he said.

According to Dana A. Kravetz of Michelman & Robinson LLP, if employers are not careful in their implementation of agreements containing waivers, they could open themselves up to fresh litigation.

"You can't just say, 'Let me draft a new agreement.' You need to grapple with how to get it into place and the pitfalls of implementation," Kravetz said. If you're the plaintiffs' bar you're going to jump on the implementation. Part of it is the timing with which you notify a candidate that part and parcel with their employment will be signing this agreement."

Kravetz said that he would advise employers to introduce the agreement to prospective employees well ahead of time, before they leave current jobs or move. Not doing so could open a company to litigation for "cornering" a potential hire.

Another issue Kravetz raised was how to introduce an updated agreement to a population of existing employees. He suggested that it be rolled out as part of a larger policy update, and to offer consideration such as extra floating holidays.