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.
Arbitration provisions are increasingly a focus in non-competition litigation these days and are being used in a variety of strategic ways to assist with the enforcement of non-competition clauses. The United States Supreme Court recently held that an arbitrator, not a state court, should have decided the enforcement of non-competition clauses. The employer filed for arbitration when two of its employees, who had arbitration provisions in their employment contracts, went to work for a competitor. The employees filed a state court action challenging the enforcement of the arbitration and non-competition clauses. The state court held that the non-compete clause was unenforceable but that the arbitration agreement was enforceable. The United States Supreme Court found that where an enforceable arbitration agreement exists, the arbitrator, not the state court, has the authority to determine whether the non-competition clauses were enforceable. “Our cases hold that the FAA forecloses precisely this type of ‘judicial hostility towards arbitration,’” the court said, citing AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011).
A 2-1 California Court of Appeal held on October 17 that drivers for a food service provider did not have to arbitrate their state statutory claims brought under the California Labor Code despite a binding arbitration agreement covering the “application or interpretation” of the driver agreements. The drivers alleged that their employer, Mike Campbell & Associates, misclassified them as independent contractors, denying them wage law protections under the California Labor Code, and was thus liable for nonpayment of wages, illegal deductions, and recordkeeping violations. Rather than challenge the trial court’s ruling that they were bound by the arbitration clause, the drivers argued that their statutory claims did not arise out of the arbitration agreement and thus did not require an interpretation of the arbitration clause.
On June 4, 2012, the California Court of Appeal held that class-action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (“FAA”). In Iskanian v. CLS Transportation Los Angeles LLC, the appeal court affirmed an order to compel arbitration of wage-and-hour claims in light of the 2011 United States Supreme Court case AT&T Mobility LLC v. Concepcion. As a result, Iskanian provides employers with the necessary ammunition to argue for the enforceability of employment contract provisions providing for arbitration of claims and waiver of class-action lawsuits.
Two members of the National Labor Relations Board recently held that employers may not require employees to enter into arbitration agreements, as a condition of employment, that waive the ability to pursue class or collective claims. The Board’s ruling does not sound the death knell for class action waivers, however, as many Plaintiff’s lawyers have touted.