The Risks of Rolling Out Arbitration During Active Class Litigation

Key Highlights

• The Ninth Circuit affirmed a district court’s refusal to compel arbitration where an employer rolled out mandatory arbitration agreements during a pending wage-and-hour class action.
• The court emphasized that Rule 23(d) gives district courts broad authority to regulate communications with putative class members and protect the integrity of class proceedings.
• Employers considering arbitration agreements during active class litigation should carefully vet the timing, manner and messaging of any rollout to avoid communications that could be viewed as coercive or discouraging class participation.

An employer’s arbitration rollout strategy matters just as much as the agreement itself.  Earlier this year, the Ninth Circuit issued an important decision that serves as a cautionary reminder that employers who wish to roll out arbitration agreements during a pending wage and hour class action must do so with careful consideration.  Otherwise, its efforts may prove futile. 

How the Employer Introduced the Arbitration Agreement

Avery v. TEKsystems, Inc., 165 F.4th 1219 (9th Cir. 2026) involved a putative class of recruiters who alleged that their employer, a professional staffing agency, had misclassified them as exempt and failed to pay them overtime or provide breaks.  After nearly two years of litigation and after class certification briefing, the employer rolled out a new, mandatory arbitration agreement applicable to class members and subsequently moved to compel arbitration against class members. After the district court denied the motion, the employer appealed.

Why the Ninth Circuit Refused to Compel Arbitration

The arbitration agreement was rolled out in two stages.  First, the employer sent an email to all employees attaching its mandatory arbitration agreement with a class-action waiver and an FAQ which provided additional commentary on class actions, including the company’s position that arbitration was “more efficient and cost effective.” Second, the employer sent another email to putative class members with a “Notice of Opt Out” form which provided that if employees wished to remain a part of the putative class, they could opt out of the arbitration agreement. 

Rule 23(d) Gives Courts Broad Authority Over Class Communications

The Ninth Circuit affirmed the denial and held that district courts have broad authority under Federal Rule of Civil Procedure 23(d) to protect the integrity of class proceedings and regulate putative class communications. Importantly, the court rejected the employer’s argument that the Federal Arbitration Act (“FAA”) required enforcement of the agreements, emphasizing that the district court’s ruling did not target arbitration itself, but rather the employer’s conduct in procuring the agreements.

Key Takeaway for Employers

Rolling out new arbitration agreements mid-litigation of a class action is not unlawful, but it does carry legal risks and therefore must be carefully vetted to maximize enforceability. Businesses considering new arbitration agreements should work closely with counsel to evaluate not only the substance of the agreements, but also the timing, manner and messaging of the rollout.  Even an otherwise enforceable arbitration agreement may not survive judicial scrutiny if implemented during active class litigation through communications that are anything less than clear, neutral, and free from language that could discourage class participation or effectively pressure employees to opt out.

For assistance navigating employee arbitration agreements, contact your Polsinelli Labor & Employment attorney.