Class Action Waivers Prevail!
July 16, 2014A class action lawsuit can cripple an organization and tie up assets for years. Two wins for employers in the last few weeks in this area will have a significant impact on the ability of employers to require employees to sign class action waivers as a part of their employee dispute resolution programs.
California has fought adamantly to distinguish between California precedent and recent Supreme
Court holdings. The state has continued this trend for almost three years upholding cases despite precedent to the contrary. Iskanian v. CLS Transportation involved a Plaintiff seeking to bring a wage and hour class action against CLS on behalf of himself and similar situated individuals. CLS sought to have the case remanded to arbitration on an individual basis since the employee had signed an agreement with CLS. Iskanian ultimately raised the question whether Gentry v. Superior Court could stand in light of the AT&T v. Concepion decision from 2011. The California Supreme Court held that it could not. “Under the logic of Concepcion, the FAA preempts Gentry’s rule against employment class waivers.” Iskanian at p.8.
Ishkanian's holding includes an exemption for third parties that are not part of the employment agreement. Because of this, any claims regarding the rights of a third party or on behalf of a third party, like the PAGA, cannot be waived. This type of exemption is usual practice in contract law. Ishkanian clears the way for more California employers to proceed with a well-drafted ADR plan that includes a class action waiver.
The National Labor Relations Board also rejected class action waivers in 2012 with DR Horton. Although several district and circuit courts have refused to follow the NLRB’s views regarding concerted activity, a sense of concern still existed for employers. Federal courts sought to uphold class action waivers while the NLRB relied on their opinion in DR Horton. In June 2014, the Supreme Court of the United States released their opinion in National Labor Relations Board v. Noel Canning which makes the future of DR Horton questionable.
In 2012, during a three day intra-session recess of Congress, President Obama used his recess appointment power to appoint three members to vacant positions on the NLRB. Noel Canning argued that the President did not have the power to make these appointments since Congress was still in session. These members made up 3 of 5 seats on the board. If these positions were improperly filled, any decisions issued by that board could be thrown out. The Court agreed unanimously that the President improperly filled the positions. Although the Court recognized the significance of the President’s recess appointment power, the justices agreed that the President did not properly execute this power given the circumstances. The decision in the case should eleviate some of the fears held by employers on how the EEOC would react regarding the class action waivers in employment agreements. (for more information, see NLRB v. Noel Canning, decided June 26, 2014 and D. R. Horton, Inc. and Michael Cuda NLRB Case 12–CA–25764)
If you are an employer who has yet to protect yourself with a proper alternative dispute resolution program, now is the time to move forward. Employers have repeatedly had these programs upheld across the country. These programs can be risky, however, if not properly drafted. Regular review of these programs and proper set-up is crucial given the changing laws in employment practices.
Note: EDR systems designs programs for businesses of all sizes that are continuously reviewed and updated. If you would be interested in learning more about how to get your ADR program in place, then contact EDR today!
Nicole Crump, JD, CIC
Director of Employment ADR
EDR Systems
This information is purely the opinion of the writer and is not meant to be construed as creating an attorney-client relationship or as legal advice to any individual or business. Please consult your attorney if you need legal advice on the issues above.