The United States Supreme Court has granted consolidated review of three cases to determine whether arbitration agreements that waive employees’ rights to participate in a class action lawsuit against their employer are unlawful. The Court’s decision to address the uncertainty surrounding class action waivers of employment claims follows a circuit split last year in which the Fifth and Eighth circuits upheld such waivers and the Seventh and Ninth circuits found that such waivers violate the National Labor Relations Act. Given the increasingly widespread use of class action waivers by employers to stem costly class and collective actions, the high court’s ruling is likely to have a significant nationwide impact.
The Ninth Circuit has joined both the Sixth and Fifth circuits in holding that USERRA claims are subject to arbitration pursuant to an employee’s agreement to arbitrate employment related claims. See Ziober v. BLB Resources, Inc., 2016 WL 5956733 (9th Cir. Oct. 14, 2016). In doing so, the Ninth Circuit, a traditionally pro-employee circuit, has assuaged any fear of uncertainty that employers may have had with respect to their rights to compel arbitration of USERRA claims.
The U.S. Supreme Court refused on Monday to take up a challenge to the California Supreme Court’s holding that California Private Attorney General Act (“PAGA”) claims cannot be waived in employment arbitration agreements containing a class action waiver.
A California appellate court recently invalidated an arbitration agreement that an employee had voluntarily entered into on the basis that it contained an unenforceable waiver of the employee’s claims under the California Private Attorneys General Act (“PAGA”) and, under the parties’ agreement, that provision could not be severed.
Often times, the same set of underlying facts will give rise to both a contractual dispute between an employer and a union and an unfair labor practice charge. In these instances, an arbitrator usually decides the contract dispute, while it is the National Labor Relations Board’s responsibility to determine the merit of the alleged unfair labor practice. Historically, however, the Board has commonly declined to hear unfair labor practice charges related to contractual disputes, and has instead deferred to arbitrators’ earlier contractual rulings. Until recently, the burden fell on the party seeking to avoid Board deferral (usually the union) to prove that deferral was inappropriate. Practically, this ensured that employers could easily avoid addressing the same issues or facts in essentially duplicative litigation.
On June 23, 2014, the California Supreme Court announced a landmark ruling that arbitration agreements with mandatory class waivers are generally enforceable while carving out one notable exception. That exception consists of representative claims brought under the Private Attorneys General Act (PAGA) which is unique to California.
Jurisdiction may be the most important factor organizations should take into consideration when offshoring. Some countries do not recognize certain U.S. legal doctrines, such as confidentiality agreements, and without proper jurisdiction an organization may be unable to enforce its contract with a vendor.
When selecting an offshore country, organizations should consider whether the country permits a choice of law provision which would allow courts to apply U.S. law. If the country permits choice of law provisions, the provision should be well defined in the contract so that there is no ambiguity. Organizations should also consider working with counsel in the offshore country to assist with legal intricacies, even if a United States choice of law provision is permissible.
Vance v. Ball State University: Narrow Definition of Supervisor in Harassment Suits
In Vance, the Supreme Court announced a narrow standard for determining which employees constitute “supervisors” for purposes of establishing vicarious liability under Title VII. In a 5-4 decision, the Court decided that a supervisor is a person authorized to take “tangible employment actions,” such as hiring, firing, promoting, demoting or reassigning employees to significantly different responsibilities. The majority opinion rejected the EEOC’s long-advanced definition that a supervisor is a person who could either make tangible employment actions or direct an employee’s daily work activities. In making this ruling, Justice Alito called the EEOC’s definition a “study in ambiguity.”
Last week, in American Express Co. v. Italian Colors Restaurant, the United States Supreme Court, in a 5-3 ruling, reversed the Second Circuit and held that a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act (FAA) even if the cost of proving an individual claim in arbitration exceeds the potential recovery. In holding that a class action waiver in an arbitration agreement is enforceable, even as to federal anti-trust claims, this decision builds upon the trend set in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) – that arbitration agreements should be enforced according to their terms even for claims under federal statutes.
The Supreme Court has unanimously upheld an arbitrator’s ruling that a contract that required arbitration of “any dispute” constituted an agreement to class-wide arbitration. The Court’s narrow ruling turns on the parties’ express agreement to allow the arbitrator to decide whether their contract, which contained an arbitration provision but did not mention class proceedings, authorized class arbitration. However, the opinion has significant implications for companies desiring to avoid class arbitration—and class actions generally—through provisions in their consumer, business, and employment contracts.