After the California Supreme Court’s recent decision in Iskanian v. CLS Transportation, which held that PAGA representative action waivers are unenforceable under California law, employers have struggled with whether to retain such waivers in their arbitration agreements. The answer to whether such waivers should be retained is not as straightforward as one might expect.
In an unwelcome, mid-summer surprise for the business community, President Obama signed the Fair Pay and Safe Workplaces Executive Order on Thursday July 31, 2014 requiring federal contractors to report violations of federal and state labor and employment laws and prohibiting certain contractors from requiring that employees arbitrate disputes alleging violations of Title VII or claims for sexual assault or harassment. The Executive Order also requires federal contractors to provide relevant information about hours worked and overtime on employee paychecks.
Joining the ever growing list of opinions on the arbitrability of class claims, an NLRB Administrative Law Judge recently ruled that an arbitration agreement that did not expressly bar workers from bringing class or collective actions still violated federal labor law because the employer’s steps taken to enforce the agreement in court had the practical effect of doing so. READ MORE
On October 17, 2013, the California Supreme Court revisited the enforceability of arbitration agreements in California. The Court released its decision Sonic-Calabasas Inc. v. Moreno (Sonic II). In that 5 – 2 ruling, the California Supreme Court reversed its prior decision to strike down an arbitration agreement on the ground of FAA preemption, but remanded the case for analysis of the enforceability of the arbitration agreement under an unconscionability analysis. READ MORE
Lest there be any lingering confusion, the U.S. Supreme Court has once again reminded us that arbitration agreements are to be “rigorously enforced.” In this latest installment of pro-arbitration decisions from the high court, a majority of the justices (5-3) upheld a class arbitration waiver as enforceable even when the cost of individually arbitrating a federal statutory claim exceeds the potential recovery. Although the decision arose in the antitrust context, the broad language in the opinion opens the door for enforcement of class action waivers in wage-and-hour class and collective actions where employers have included such waivers in their arbitration agreements with their employees. READ MORE
Ever have that feeling that your arbitrator just doesn’t understand you? You may be right, but there’s not much you can do about it. A recent unanimous ruling by the United States Supreme Court should encourage employers to review the language in their arbitration agreements to ensure clarity on the issue of class arbitration. In Oxford Health Plans LLC v. Sutter, No. 12-135, slip op. at 4-5, 8-9 (U.S. June 10, 2013), the Supreme Court reiterated that parties who agree to arbitration and ask the arbitrator to decide an issue are stuck with the “good, bad, or ugly” decision of the arbitrator. Even where, as in this case, the arbitrator makes a dubious decision that the parties’ contract allows class arbitration, Federal Arbitration Act § 10(a)(4) does not allow a court to second-guess that decision.
Sutter, a pediatrician, and Oxford Health Plans, an insurance company, entered into a contract for services that included the following arbitration clause: “[n]o civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration . . . .” Id. at 1-2. Later, Sutter brought suit in state court on behalf of himself and a proposed class of other doctors alleging that Oxford Health Plans had violated their contracts and various state laws. Id. Upon Oxford Health Plans’ motion, the case was compelled to arbitration. Id. at 2. Critically, the parties agreed that the arbitrator should decide whether their contract authorized class arbitration, and the arbitrator determined that, based on the terms of the clause quoted above, it did. See id. at 2, 3. Oxford Health Plans brought a motion in federal court arguing the arbitrator’s decision should be vacated on the ground that he had “exceeded [his] powers” under Federal Arbitration Act § 10(a)(4). Id. READ MORE
In a July 30, 2012 decision the Second Appellate District of the Court of Appeal ruled that an employee was not bound by the arbitration clause in his employee handbook for a slew of reasons:
- the clause itself was buried (or as the Court said “not specifically highlighted”) in a lengthy handbook and was not called to the employee’s attention;
- the employee did not specifically acknowledge the clause or agree to arbitrate, but merely signed an acknowledgment of receipt of the handbook itself;
- the handbook contained a (relatively) standard clause that it was not intended to create a contract but, the employer also “had it both ways” and retained the rights to unilaterally amend the handbook’s provisions;
- the employer failed to provide the employee with the specific arbitration rules; and
- the clause itself was found unconscionable: procedurally, because the employer did not distribute the rules governing the arbitration to employees and because the issue of arbitration was not negotiable and, substantively, because it required the employee to relinquish administrative and judicial rights and made no express provision for discovery rights.
While this decision points out the pitfalls of this particular factual scenario, it also highlights some nuances. As courts reinvigorate their scrutiny of arbitration clauses and agreements, due to what this Court called “the increasing phenomenon of depriving employees of the right to a judicial forum,” employers may want to revisit and revise their handbook language.
A California Court of Appeal recently required a plaintiff to forego class and representative action claims in Nelsen v. Legacy Partners Residential, Inc., No. A132927 (Cal. App. July 18, 2012) finding that she failed to show the employer’s arbitration agreement was unconscionable or that compelling individual arbitration would violate state or federal law or public policy. Knocking down the attempt to keep class and representative claims alive in either a judicial or arbitration proceeding, the First Appellate District held that all of the plaintiff’s California Labor Code claims, as well her claim for injunctive relief, had to be arbitrated on an individual basis. READ MORE
In Iskanian v. CLS Transportation Los Angeles, LLC, (Cal. Ct. App. June 4, 2012), the California Court of Appeal for the Second Appellate District affirmed a decision to compel individual arbitration of wage-and-hour claims pursuant to an employment agreement that contained class and representative action waivers, holding that the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion was controlling. READ MORE
A new ruling from the Northern District of California, Morvant v. P.F. Chang’s Bistro, Inc. (May 7, 2012), confirms the enforceability of class action waivers despite contrary California law and the National Labor Relations Board’s opinion in D.R. Horton. READ MORE