Yesterday, the United States Court of Appeals for the Ninth Circuit – the federal appellate court for many western states, including California and Nevada – held that mandatory employment arbitration agreements containing a waiver of employees’ substantive right to pursue class action cases or other concerted, work-related legal claims violate the National Labor Relations Act (“NLRA”). In other words, employers cannot condition employment on the waiver of the employees’ right to act as a group to bring a class action suit against the employer. A link to the case can be found here: https://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/22/13-16599.pdf.
The court stated “concerted action is the basic tenet of federal labor policy, and has formed the core of every significant federal labor statute leading up to the NLRA.” Interpreting the language of the NLRA, the court determined that employers must preserve the substantive right of employees to pursue work related claims “together.” Any mandatory agreement infringing upon this right will be deemed unenforceable. This ruling is crucial to every employer because the NLRA applies to both union and non-union employers across the country.
In the case at issue, as a condition of employment, the employees were required to sign agreements that contained a “concerted action waiver” requiring the employees to pursue legal claims against the employer exclusively through arbitration and to arbitrate only as individuals in “separate proceedings” – meaning employees could not bring a class action lawsuit against the company.
The Ninth Circuit Three-Judge Panel held, 2-1, that under this agreement the employer interfered with employees’ substantive right to engage in concerted activity under the NLRA by requiring employees to resolve all legal claims in separate proceedings. It is uncertain whether or not the Employer will seek review of this case before the United States Supreme Court.
Take-Away for Employers
Employers, if you are located in the Ninth Circuit (which includes California and Nevada) you should review your employment agreements with our firm or other qualified legal counsel to determine compliance with this new case.
SHLC will continue to monitor this case and will also discuss this case and related developments during our October 5, 2016 monthly webinar for California and Nevada employers and at our live Wage and Hour Seminar on October 11, 2016. For more information on our webinars and seminars, contact any of our offices, email us at email@example.com, or visit the Events page of our website at https://suttonhague.com/events.
The case is Morris et al. v. Ernst & Young LLP et al.