Source: https://uclawreview.org/2017/12/13/waiving-goodbye-to-class-action-waivers/
Timestamp: 2019-04-20 08:23:02+00:00

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Employment arbitration agreements containing class and collective action waivers ensure individual arbitration of employees’ employment-related claims. One issue that has arisen is whether an employer’s prohibition on pursing class and collective action claims violates an employee’s right to act in concert with other employees. In May 2017, the Sixth Circuit held that mandatory class and collective action waivers, as a condition of employment, violate the National Labor Relations Act (NLRA) and are therefore unenforceable. This decision is in line with the Seventh and Ninth Circuit approaches to class action waivers. However, the Fifth and Eighth Circuits have both found that class and collective action waivers are valid and enforceable under the Federal Arbitration Act (FAA). The US Supreme Court granted certiorari to resolve this circuit split and to determine whether class action waivers violate the NLRA, or whether they are enforceable under the FAA. The Supreme Court should follow Sixth Circuit precedent and hold that mandatory class and collective action waivers are an unlawful violation of the NLRA. By prohibiting employees from collectively bringing suit against their employer, the interpretations of the Fifth and Eighth Circuits interferes with employees’ ability to level the playing field between them and their employer.
In D.R. Horton, Inc. v. NLRB, the Fifth Circuit upheld enforcement of a class and collective action waiver provision that prohibited employees from “filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial.” The employee in D.R. Horton sought to bring a collective action against his employer for unlawfully misclassifying him and other similarly situated employees as exempt from statutory overtime protections. The employer argued that the arbitration agreement barred its employees from pursuing collective claims, but allowed for them to initiate individual arbitration proceedings. In its decision, the Fifth Circuit found that (1) the policy considerations behind the NLRA did not override the policy considerations in the FAA and (2) class and collective action waivers do not violate employees’ substantive rights.
The FAA was intended to prevent courts from treating arbitration agreements less favorably than other private contracts. Under the FAA, arbitration agreements must be enforced according to their terms, unless the agreement violates grounds that exist at law or in equity for the revocation of any contract. Creating a circuit split, the Fifth Circuit found that class and collective action waivers do not violate any substantive rights and therefore are not protected by Section 7 of the NLRA. When reaching this conclusion, the Fifth Circuit analyzed whether the Rule 23 right to class action constitutes a substantive right protected by the NLRA. The Fifth Circuit looked to previous Fifth Circuit decisions that have “characterized a class action as a ‘procedural device.’” Accordingly, the court found that the use of class action procedures is procedural, not substantive, and therefore not protected by the NLRA. As a result, the Fifth Circuit held that class and collective action waivers do not violate the NLRA and are therefore enforceable under the FAA.
In NLRB v. AEI, the Sixth Circuit found that a mandatory arbitration agreement was unenforceable when it required its satellite technicians to waive their right to class or collective actions in both arbitral and judicial forms, as a condition of their employment. When determining whether the class action waiver provision was enforceable, the Sixth Circuit rejected the Fifth Circuit’s analysis in D.R. Horton. The Sixth Circuit found that the question was not whether the policy considerations of one statute override the other. Rather, the Sixth Circuit found that the NLRA and FAA are compatible with one another.
Arbitration is favored in the legal system for several reasons. Employers commonly favor arbitration agreements due to the high costs associated with litigation. Likewise, the FAA also favors arbitration because it is often a quicker, cheaper, and more efficient method of dispute resolution. In addition, courts have been favorable towards arbitration agreements because arbitration helps to clear their dockets. The issue here is not whether mandatory arbitration policies are valid; that issue has already been settled. Rather, the issue here is whether employers may eliminate employees’ ability to pursue collective-suit filings, through either litigation or arbitration. Courts have held that a “lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is ‘concerted activity’ under Section 7” of the NLRA. The NLRB and the Sixth, Seventh, and Ninth Circuits recognize that class and collective action lawsuits help to equalize employee bargaining power. This is precisely the goal that Congress had in mind when it passed the NLRA.
Class action lawsuits are an employer’s worst nightmare. The cost of a class action lawsuit is enough to pressure an employer into settling any claim, regardless of its merit. Otherwise, a company could go out of business just from the high cost of legal fees associated with a collective suit. Discovery in a class action suit is time consuming and extremely expensive. An individual claim in arbitration can be resolved much quicker. A class and collective action waiver eliminates the risk that an employer would have to potentially defend against an entire class of individuals, rather than just against a single claim. Although there are many benefits to employers in prohibiting employees’ collective suits, such prohibitions can be detrimental to an employee’s ability to confront his or her employer.
Collective lawsuits help to level the playing field between employees and their employer. Historically, class actions have “proved critical to the protection of rights of employees, consumers, medical patients, racial or ethnic minorities, and others who lack the resources to litigate individual claims.” Without the availability of a class or collective action, employees lose a form of leverage against employers that violate multiple employee rights. The possibility of a class or collective action suit can discourage an employer from continuing a practice that violates its employees’ rights because the risk of a class or collective action is too high. In addition, collective filing suits enable employees who may not be able to afford to sue individually to be able to pursue claims against their employers. Some claims are not worth pursuing on an individual basis because the cost of pursuing them may far outweigh the potential remedies. Plaintiff’s employment attorneys often work on a contingency basis and may be discouraged from taking cases that are unlikely to be profitable on an individual basis. Collective suit filing is also an efficient method of resolving many claims at once. It avoids inconsistent judgments and saves judicial resources.
If an employer barred class action through litigation, but allowed for collective action through arbitration, then this type of provision should be enforceable because it would still allow for an employee to engage in concerted activity through arbitration. However, under the Fifth and Eighth Circuit rulings, employers may deny employees the ability to act concertedly through both forums, arbitral and judicial. Under this approach, employees may not join together to confront their employer through any legal process, and are forced to pursue all employment-related disputes on an individual basis. As a result, class action waivers violate an employee’s Section 7 right to engage in concerted activity. Therefore, the Supreme Court should uphold Sixth, Seventh, and Ninth Circuit precedent and find that class action waivers violate the NLRA and are therefore unenforceable under the FAA.
 D.R Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013).
 Natl. Lab. Rel. Bd. v. Alt. Ent., Inc., 858 F.3d 393 (6th Cir. 2017).
 Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016).
 D.R Horton, 737 F.3d at 344; Murphy Oil USA, Inc. v. N.L.R.B., 808 F.3d 1013 (5th Cir. 2015); Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013).
 D.R Horton, 737 F.3d at 356.
 D.R Horton, 737 F.3d at 357.
 Id (quoting Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643 (5th Cir. 2012).
 Alt. Ent., Inc., 858 F.3d at 411.
 The FAA’s saving clause provides that arbitration agreements are enforceable unless they violate any “grounds as exist at law or in equity for the revocation of any contract.” Alt. Ent., Inc., 858 F.3d at 406.
 Brady v. Nat’l Football League, 644 F.3d 661, 673 (8th Cir. 2011).
 Alt. Ent., Inc., 858 F.3d at 402.
 Sternlight, As Mandatory Binding Arbitration Meets the Class Action, Will the Class Action Survive?, 42 Wm. & Mary L. Rev. 1, 12 (2000).
 Id. at 29-30 (“Class actions have been praised widely for a variety of attributes including efficiency, improving access to the litigation system, and serving the public interest. In terms of efficiency, it is claimed that they allow issues involving multiple persons or institutions to be resolved more cheaply and expeditiously. As to access, numerous courts including the Supreme Court have emphasized that the class mechanism can make possible suits which otherwise would have been logistically or economically impossible.”).

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