Class Action Waivers in Employment Agreements Are No Longer Enforceable in the Ninth Circuit

Another twist in the saga of enforceability of class action waivers renders a blow to employers in Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Mariana Islands, Oregon and Washington. If you operate in one of these locations, a recent decision by the Ninth Circuit Court of Appeals nullifies class action waivers in employment agreements.

• Limitations. The Ninth Circuit joined the Seventh Circuit and zeroed in on employees’ Section 7 rights under the National Labor Relations Act (“NLRA”) in stating that employees are guaranteed the right to “engage in . . . concerted activities for the purpose of . . . mutual aid or protection” by the NLRA. The Court held that protection for “concerted activities” means that employers cannot require employees to waive their right to pursue legal claims as a class action. The prohibition on class and collective action waivers applies to a court action as well as arbitration.


• Looking Ahead. The Fifth, Second and Eighth Circuits approve of class action waivers in employment agreements. Given that the Circuits are split, and the prevalence of class action waivers, this issue may well reach the Supreme Court. For now, here are a few options for those affected by the Ninth Circuit’s decision:
   
  1. You can scrub your agreements of class action waivers but maintain mandatory arbitration, forcing legal claims – individual and class – into arbitration. Before doing so, however, discuss with your legal counsel whether you are better suited defending a class action in court versus in arbitration.
  
  
  2. You can require that individuals arbitrate their claims, but also mandate that class actions be heard in court. Again, this is something to vet with your legal counsel. The agreement must allow employees some forum, either arbitration or court, to maintain a class or collective action. Not doing so means you run the risk of running afoul of the NLRA.
  
  
  3. Finally, if you have employees in and beyond the Ninth Circuit, you could consider language that confirms the waiver is enforceable to the extent applicable law allows.

Click here to read more about the history of this decision and follow our World of Employment blog for updates on this topic and many others.

Labor & Employment partner Brenda Baumgart is available to answer any questions you may have about how this change may impact your workforce, or feel free to contact your Stoel Rives relationship attorney.