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.
With its May 26 Lewis v. Epic-Systems Corp. decision, the Seventh Circuit became the first circuit to back the reasoning in D.R. Horton, Inc., 357 NLRB No. 184 (2012), and held that a mandatory arbitration agreement prohibiting employees from bringing class or collective actions against their employer violates the National Labor Relations Act (NLRA). This decision creates a circuit split regarding the enforceability of arbitration agreements with class action waivers in the employment context, and the issue is now ripe for potential Supreme Court review.
On January 20, 2016, the U.S. Supreme Court issued its ruling in Campbell-Ewald Co. v. Gomez, affirming the Ninth Circuit’s decision that a defendant cannot moot a putative class action by offering full relief to the individual plaintiff.
In the second half of December 2015, the National Labor Relations Board (“NLRB”) issued 16 rulings on the illegality of mandatory arbitration agreements containing class and collective action waivers, even in situations where the agreements allow employees to opt out of, or into, the waiver. The NLRB continues to hold firm that these types of waivers violate the National Labor Relations Act (“NLRA”) because they infringe upon the employees’ protected right to engage in concerted activity—despite the U.S. Supreme Court’s continued favoring of class action waivers, see, e.g., DirecTV, Inc. v. Imburgia, 577 U.S. __, 135 S. Ct. 1547 (2015), and the Fifth Circuit’s express rejection of the NLRB’s position in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), and in Murphy Oil USA, Inc. v. NLRB, No. 14-60800, 2015 U.S. App. LEXIS 18673 (5th Cir. Oct. 26, 2015).
Retailer Big Lots Stores, Inc. is facing a putative class action in Philadelphia, wherein the plaintiff alleges that the company “systematically” violated the Fair Credit Reporting Act’s (“FCRA”) “standalone disclosure requirement” by making prospective employees sign a document used as a background check consent form that contained extraneous information. Among other things, the plaintiff alleges that Big Lots’ form violates the FCRA because it includes the following three categories of extraneous information: (1) an “implied liability waiver” (specifically, a statement that the applicant “fully understand[s] that all employment decisions are based on legitimate nondiscriminatory reasons”); (2) state-specific notices; and (3) information on how background information will be gathered and from which sources, statements pertaining to disputing any information, and the name and contact information of the consumer reporting agency.
In a move that could significantly increase the cost and expense of defending a Fair Labor Standards Act (“FLSA”) collective action, a federal district court Judge has dispensed with the traditional method for joining putative class members in an FLSA collective action. The Judge is going to permit employees to join if they submit a notice. Such a move could lead to more protracted litigation and will certainly be appealed. In Turner, et al. v. Chipotle Mexican Grill, Inc., No. 1:14-cv-02612, Senior U.S. District Judge John L. Kane of the U.S. District Court for the District of Colorado granted the plaintiffs’ motion for conditional certification and judicial notice to the class. The case involves plaintiffs’ wage and hour claims against Chipotle under the Fair Labor Standards Act and the state laws of Arizona, California, Colorado and New Jersey. That the plaintiffs’ motion was granted is not, in and of itself, notable. But what is remarkable is the procedure applied for those who would seek to join the suit.
On August 12, 2015, the Fifth Circuit held that an unaccepted Rule 68 offer of judgment to a named plaintiff in a class action does not render the plaintiff’s claim moot. In Hooks v. Landmark Indus., Inc., No. 14-20496 (5th Cir. 2015), the Fifth Circuit joined the minority of Circuit Courts—Second, Ninth, and Eleventh Circuits—and held that an unaccepted Rule 68 offer is a legal nullity, with no operative effect. The majority of the Circuit Courts to decide this issue —Third, Fourth, Sixth, Seventh, Tenth, and Federal Circuits—have all held that a complete Rule 68 offer moots an individual’s claim.
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.
In Mark v. Gawker Media LLC (“Gawker”), S.D.N.Y. Case No. 13-cv-4347, the Court permitted Plaintiff’s counsel to submit a plan to distribute class notice through social media. Plaintiff put forward a plan to use five websites to not only distribute notice, but also to potentially locate additional collective action members. The Southern District of New York rejected this proposal, even after the parties had agreed to certain aspects of it, finding “[t]he proposals [were] substantially overbroad for the purposes of providing notice to potential opt-in Plaintiffs, and [that] much of Plaintiff’s plan appear[ed] calculated to punish Defendants rather than provide notice of opt-in rights.”