SCOTUS Restricts Class Arbitrations 2019-04-24T11:30:51-06:00

Posted on April 24, 2019

In yet another pro-arbitration, employer-friendly decision, the U.S. Supreme Court ruled this morning that an individual cannot pursue claims in arbitration on behalf of a class unless the arbitration clause involved clearly and unequivocally permits class treatment of claims. Lamps Plus v. Varela, 17-988 (April 24, 2019).

Varela worked for Lamps Plus when a hacker successfully obtained tax information from Lamps Plus for some 1,300 employees, including Varela. Varela filed a class action in federal court. Lamps Plus moved to compel arbitration under Varela’s employment agreement, which included mandatory arbitration. The District Court compelled arbitration, but did so on a class basis, forcing Lamps Plus to defend Varela’s entire class action in an arbitral forum, rather than simply defending Varela’s own personal claim. The Ninth Circuit predictably upheld the District Court’s ruling, concluding that because Varela’s arbitration agreement was ambiguous with respect to class arbitration, the agreement must be construed against Lamps Plus and class arbitration must be inferred.

In a 5-4 decision, the Supreme Court reversed the decisions below. The Court criticized the Ninth Circuit for applying California contract law doctrines that undermine the powerful presumption that parties are bound to arbitrate only in the manner to which they specifically agreed. The Court noted the significant problems posed by class-wide arbitration, most of which undermine the very purposes of arbitration in the first place. Against this background, the Court held that parties to an arbitration agreement can only be forced into arbitration of class claims when the arbitration agreement unambiguously provides for class arbitration. Neither silence nor ambiguity on the subject will suffice to infer the parties’ agreement to class arbitration.

At a time when Congress, many states (especially California, over, and over, and over…), the media, and some large employers are questioning the future viability of mandatory arbitration outside the collective bargaining setting, our Supreme Court continues to emphasize the values of, and strong federal policy favoring arbitration agreements. Lamps Plus stands for the proposition that a court cannot infer consent to class arbitration when an arbitration agreement is silent or ambiguous on the topic. That being said, employers can avoid the question altogether by simply prohibiting class claims in their arbitration agreements.

SCOTUS Upholds Class-Action Waivers 2018-05-21T09:49:04-06:00

Posted on May 21, 2018

By Bryan Stillwagon

May employees and employers agree that any disputes between them will be resolved only through one-on-one arbitration? Today, the Supreme Court responded, “YES.”

In a 5-4 decision, the Court held in Epic Sys. Corp. v. Lewis, Ernst & Young LLP et al. v. Morris et al., and NLRB v. Murphy Oil USA, Inc., that employers may reach enforceable agreements with their employees that the employees will not bring class or collective actions. In recent years, employees have argued that the forced waiver of class- and collective-action procedures violated the Arbitration Act’s savings clause and the NLRA’s right to engage in collective action. Rejecting those arguments, the Court leaves intact a beneficial tool for employers in avoiding costly multi-plaintiff actions.

Read our full advisory here.

SCOTUS To Decide Class Action Waivers 2017-01-13T15:52:59-07:00

Posted on January 13, 2017

By Bill Wright

The Supreme Court has agreed to resolve the simmering dispute between the NLRB and (essentially all) employers over class action waivers. The NLRB has maintained in a number of cases that employers may not enforce arbitration agreements with employees that (1) require employees to arbitrate all disputes and (2) prohibit the employees from bringing collective or class actions in the arbitration. Although two circuit courts have agreed with the Board, most courts have disagreed, relying on the Federal Arbitration Act.

Now the Supreme Court will decide the matter. https://www.supremecourt.gov/orders/courtorders/011317zr_q8l1.pdf The Court granted review in three cases: Murphy Oil USA, Inc. v. NLRB; Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris. The parties in the three cases phrase the legal issue differently, but the gist of it is best stated in Epic Systems:

Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act.

Stay tuned for oral argument and the Court’s eventual pronouncement of the Law of the Land.

Ninth Circuit Strikes Class Arb Waivers 2016-08-22T16:23:15-06:00

Posted on August 22, 2016

By John Alan Doran

The Ninth Circuit Court of Appeals weighed in, today, on the propriety of class action arbitration waivers under the NLRA. The Court held that such waivers violate Sections 7 and 8 of the NLRA in the context of a pending FLSA lawsuit.

Ernst & Young requires new employees to sign an agreement that requires employees to pursue any claims against the employer through arbitration, and such arbitrations must be pursued on an individual basis. The effect of the agreement is to prevent employees from bringing class or collective actions against the employer in court or in arbitration. But, the employees involved in this case brought a FLSA collective action lawsuit anyway. The employer moved to dismiss the lawsuit arguing that all of the potential class members had to arbitrate their respective claims separately as individuals. The trial court agreed, dismissed the case, and ordered individual arbitrations.

The Ninth Circuit reversed, however, finding that the arbitration provision violates Section 7 of the NLRA, which grants employees a statutory right to engage in “concerted” activities. The Court poo-pooed the import and impact of the Federal Arbitration Act, the stated purpose of which is to promote and enforce arbitration agreements. This is no surprise, as the Ninth Circuit has quite notoriously fought arbitration at every avenue when it comes to employment litigation. The dissenting judge in this case quite rightly describes the Court’s decision as “breathtaking in its scope and in its error”. Given the profound split on this issue between federal appellate courts, the continued vitality of this decision rests with SCOTUS, yet another point of significant interest in this election cycle.

2 Key SCOTUS Spokeo Takeaways 2016-05-16T11:06:15-06:00

Posted on May 16, 2016

By John Alan Doran

The Supreme Court held this morning that a party suing for a purely technical violation of a statute (in this case, the Fair Credit Reporting Act (“FCRA”)) must demonstrate that he/she has suffered or is likely to suffer a concrete harm from the statutory violation. Spokeo, Inc. v. Robins. Robins sued Spokeo under the FCRA when he learned that searches for him in the Spokeo search engine by third parties turned up false information about him. Robins’ lawsuit claimed that Spokeo violated the FCRA, and he was therefore entitled to an automatic statutory penalty provided in the FCRA. But it was not clear from the lawsuit whether Robins suffered or was likely to suffer any real harm from Spokeo’s technical violations of the FCRA. So, the Court sent the case back to reassess whether Robins actually complained of a concrete harm or a concrete threat of harm.

And you care because…..? First, in a footnote, the Court reemphasized that, in all class actions, the plaintiffs who bring the actual lawsuit must themselves demonstrate that they have suffered or will suffer some concrete harm. This is important because oft-times in employment class actions, the plaintiff simply claims that he/she is a member of a large class, and that the class has suffered some generalized harm from the employer’s actions. That will not be enough under Spokeo. Second, the Court’s extraordinary emphasis on the need for concrete harm may provide places of public accommodation with a new weapon in the defense of Americans With Disabilities Act Title III cases. One could read this opinion as the possible death-knell for the legions of cases where the plaintiff alleges that he/she wanted to visit a property, but was “deterred” by the alleged ADA violations on the property. And, better still, this may require the Ninth Circuit to revisit its mind-bogglingly broad ADA public accommodations decision in Doran v. 7-Eleven, Inc. (no relation to yours truly).

Class Averaging 2016-03-22T11:52:40-06:00

Posted on March 22, 2016

By Bryan Stillwagon

The Supreme Court ruled today that Plaintiffs’ use of average donning and doffing times was proper and sufficient to affirm a $5.8 million judgment against Tyson Foods. Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (Mar. 22, 2016). Plaintiffs (employees in a pork processing plant in Iowa) relied at trial on an industrial relations expert’s calculations of the average time it took for employees to don and doff required protective gear. Tyson argued basing individual damages on the expert’s average failed to consider differences in the composition of the gear that may have altered the time each spent donning and doffing.

The Court disagreed. The employer’s failure to keep adequate time records created an “evidentiary gap” and the Plaintiffs had to fill that gap through the expert’s study. Tyson could have argued the representative evidence was statistically inadequate or based on implausible assumptions (under Daubert) but it did not challenge the methodology. The Court distinguished Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), where the Court ruled the individual class members could not rely on the experiences of other workers in different stores to establish discrimination against the class members generally. Here, Plaintiffs worked in the same Tyson facility, did similar work, and were paid under the same policy. Thus, the Court found, each class member could have introduced the expert’s study in his/her individual suit. For those reasons, the Court held that the representative evidence was a permissible means of showing individual hours worked.

Plaintiffs’ attorneys will now undoubtedly argue that the Court is signaling some backtracking from Dukes. The workers are similarly situated, for class or collective action purposes, in part because they are subject to the same employer policy. But crucial here is also the fact that there were no relevant individualized records for the Court’s use. “Trial by Formula” might not be dead, but the formula must be proper.

Not Worth Fighting Over? 2016-01-21T14:07:43-07:00

Posted on January 21, 2016

By Andy Volin

In wage and hour disputes, sometimes an employer would rather just pay a claim instead of fighting it. Maybe the claim is only worth several hundred dollars and attorney’s fees would be a far greater expense. Or maybe not only is the claim small, but the plaintiff claims the dispute should be enlarged into a collective action on behalf of a class of employees, making a mountain out of a molehill. In this situation, some employers have made offers to settle the case at the outset for the full relief the individual plaintiff is seeking, using what is known as a Rule 68 Offer of Judgment. Regardless of whether the offer was accepted or not, employers have argued that the fact they made the offer meant there was no longer any controversy, and so the case should be dismissed as moot.

The Supreme Court’s ruling yesterday explained that this strategy will not work. An unaccepted offer does not make the case moot. Campbell-Ewald Co. v. Gomez, No. 14-857 (Jan. 20, 2016). This ruling should not come as a surprise, as it follows reasoning expressed in a 2013 Supreme Court case. Still, the decision gives employers reason to hope, if they tweak the strategy. Instead of merely making an offer under Rule 68, what if the employer pays the total amount claimed by the plaintiff, either directly to an account in the plaintiff’s name, or to the court involved? In this situation, the employer might still argue the case is moot. The Supreme Court majority expressly declined to rule on this strategy, but the dissenting opinions directly stated it would work.

“Biggest Idiot” Meets Class Waivers 2015-12-30T12:24:35-07:00

Posted on December 30, 2015

By John Alan Doran

The “biggest idiot theory” (our term, not the NLRB’s) states that, when the NLRB reviews an employer’s policy to see whether the policy would “chill” an employee from exercising NLRA rights, the NLRB does so from the perspective of the biggest idiot on the planet, not the mythical “reasonable employee.” (See NLRB Meets Gossip Girl) On Christmas Eve, a Grinchy NLRB took two swipes at otherwise lawful class action waivers. In Logisticare Solutions, Inc., the NLRB struck down an employer’s onboarding and handbook provisions requiring employees to waive their right to engage in class or collective actions. The Board found that the provision might be misread to prevent the filing of an unfair labor practice charge because (a) the heading above the waiver referred to “class/collective actions”, but not to “lawsuits”; and, (b) an employee (read “idiot”) might confuse the unmentioned “lawsuits” with unfair labor practice charges. What? Similarly, in 24 Hour Fitness USA, Inc. the Board struck down an employer’s arbitration agreement containing a class action waiver even though the agreement contained an unambiguous “opt-out” provision inviting employees to opt out of the company’s arbitration mechanism within 30 days of hire. The Board held that the opt-out provision did not save the class action waiver because employees were still forced to waive the right to engage in protected concerted activity. Seriously?

Lesson for today: To avoid the NLRB’s ire: (a) run all of your policies and employment agreements past the biggest idiot you can find; and (b) if the idiot unreasonably misreads a policy or agreement to deter protected concerted activities, go back to the drawing board. But don’t delay—there are very few idiots on the planet that can misread things as well as the NLRB!

SCOTUS Benchslaps Cali…Again 2015-12-14T10:38:32-07:00

Posted on December 14, 2015

By John Alan Doran

This morning, the U.S. Supreme Court struck down a California Court of Appeals decision invalidating class action arbitration waivers. DIRECTV, Inc. v. Imburgia, (No. 14-462 December 14, 2015).

DIRECTV’s customer service contract contained a mandatory arbitration clause. That clause also waived the customer’s right to pursue a class action in arbitration. The clause also stated that, if the class action waiver was void under the “law of your state”, the entire arbitration agreement was void. Two California plaintiffs sued DIRECTV under their customer service contracts. They claimed they had no duty to arbitrate because (a) California law invalidated class action arbitration waivers under its “Discover Bank” rule at the time plaintiffs entered these contracts in 2008. The problem is that the U.S. Supreme Court struck down California’s Discover Bank rule in its Concepcion decision in 2011. Plaintiffs argued, and the California Court of Appeals ruled, that the Concepcion decision had no bearing on this issue because DIRECTV and the plaintiffs were free to enter into a contract that incorporated even invalid California laws, such as the Discover Bank rule. What, what, what?!

The Supreme Court made short shrift of this argument. In a 6-3 decision, the Court held that the California court’s interpretation of the arbitration clause violated the Federal Arbitration Act and its strong policy favoring arbitration. Although this case involves mass consumer contracts, the Court’s repeated references to federal labor laws should make clear that the opinion applies with equal force to labor and employment cases. This is good news for employers who rely on mandatory arbitration/class arbitration waivers to limit their litigation exposure.

Court Order Trumps Board 2015-07-13T09:46:35-06:00

Posted on July 13, 2015

By Bill Wright

What happens when the NLRB says an arbitration agreement is illegal, but a court enforces the agreement anyway? Four plaintiffs recently found out. In Hobson et al. v. Murphy Oil USA, Inc., No. CV-10-S-1486-S (N. D. Ala. July 8, 2015), the plaintiffs brought a collective action, for themselves and others, seeking unpaid overtime. The employer raised the arbitration agreement, and the court ordered the plaintiffs to bring their individual claims in arbitration, effectively killing the plaintiffs’ attempt to bring the claims on behalf of other employees.

Instead of arbitrating, one of the plaintiffs filed an unfair labor practice charge with the NLRB, and the plaintiffs waited. And waited. Two and a half years they waited without ever starting the arbitration. Eventually, the NLRB ruled that the arbitration agreement illegally prohibited employees from engaging in protected, concerted activities, such as filing collective actions. (See our previous posts concerning DR Horton.) With the Board ruling in hand, the plaintiffs asked the court to reconsider its order on arbitration, but the court found the plaintiffs had failed to comply with its earlier order. The plaintiffs could have asked the court to stay the arbitration pending Board action, or they could have appealed the order, but instead, they just waited for over 2 years. Despite the Board’s ruling, the court called the plaintiffs’ behavior a “clear record of delay and willful misconduct” and dismissed the plaintiffs’ overtime claims as a sanction.

If you’re going to be in court, it is best to follow the court’s orders.

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