California Labor &
Employment Law Blog
Aug 22, 2016

Ninth Circuit Issues Surprising Ruling on Class Action Waivers

Topics: Arbitration Agreements, Court Decisions

Today the Ninth Circuit Court of Appeals issued its ruling in Morris v. Ernst & Young, dealing a surprising blow to the enforceability of class and collective action waivers in employment arbitration agreements.  More specifically, the Ninth Circuit agreed with the view of the National Labor Relations Board (beginning with the NLRB's D.R. Horton decision) that it is a violation of the National Labor Relations Act (NLRA) for an employer to condition employment on an employee signing an arbitration agreement that waives the employee's ability to pursue claims on a class or collective basis and instead requires that all claims be resolved on an individual basis in arbitration.  

Of course, the NLRB's D.R. Horton opinion has been widely rejected by several courts, including the Second, Fifth and Eighth Circuit Courts of Appeal.  Prior to today, the Seventh Circuit was the only Court of Appeal to agree (recently) with the NLRB's position.  California state courts similarly have rejected the NLRB's position and have enforced class action waivers in employment arbitration agreements. Thus, the majority view is that class action waivers do not violate the NLRA.  The minority view is that these waivers violate the NLRA by interfering with employees' right to engage in concerted activity for mutual aid and protection.

Today's Ninth Circuit ruling creates new uncertainty for California employers seeking to enforce arbitration agreements with their employees.  Enforceability of a class action waiver will now depend on whether the case is in California state court or in a California federal court.  If in California state court, the court likely will enforce a class action waiver in an arbitration agreement.  California federal courts, however, are bound to follow Ninth Circuit precedent and will not be able to enforce a class waiver in an arbitration agreement unless the facts can be meaningfully distinguished from those before the Ninth Circuit in the Ernst & Young case.  In that regard, it is notable that the arbitration agreement at issue in the Ernst & Young case was mandated on employees as a condition of employment.  There is some question whether the enforceability issue would be decided differently if the arbitration agreement at issue was presented to employees with a limited right to opt out of the agreement -- thus making any agreement to arbitrate and any waiver of class claims voluntary on the part of the employee.  The NLRB has not distinguished between mandatory arbitration agreements and agreements whereby employees are given the right to opt out, but there is some language in Ernst & Young suggesting that there may be a basis for such distinction.  There are, of course, downsides to allowing employees the right to opt out and it remains to be seen whether an opt-out right will impact the enforecability analysis in any event.

The split of authority among the Circuit Courts is almost certain to invite review of this issue by the United States Supreme Court.  Stay tuned for a petition for review.  In the meantime, enforceability of class waiver provisions will largely depend on where a case is venued. Federal courts within the Ninth Circuit (which includes, among other locations, California, Oregon, Washington, Arizona, and Nevada) will not be a favorable venue for employers on this issue.

About CDF

For over 25 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

> visit primary site

About the Editor

Robin Largent has a regular presence in California state and federal courts and has been lead defense counsel and appellate counsel for large and small California employers in litigation (and arbitration) ranging from individual discrimination and harassment claims to complex wage and hour representative and class actions. She also leads the firm’s appellate practice, having substantial experience and success handling appeals, writ petitions, and amicus briefs in both state and federal court on issues such as class certification (particularly in the wage and hour arena), manageability and due process concerns associated with class action trials, exempt/non-exempt misclassification issues, meal and rest break compliance, trade secret/unfair competition matters, and the scope of federal court jurisdiction under the Class Action Fairness Act.
> Contact   > Full Bio   Call 916.361.0991

CDF Labor Law LLP © 2020

About CDF What We Do Contact Us Attorney Advertising Disclaimer Privacy Policy Cookie Policy