arbitration

A Preliminary Employer Victory: California Federal Court Issues Preliminary Injunction Enjoining Enforcement of AB 51

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On February 7, 2020, Chief U.S. District Judge Kimberly Mueller of the Eastern District of California issued a detailed order explaining the court’s January 31, 2020 grant of a preliminary injunction enjoining the State of California from enforcing AB 51.

As we explained in previous coverage, AB 51 was scheduled to go into effect on January 1, 2020, and would have prohibited mandatory workplace arbitration agreements. Under AB 51, employers may not, “as a condition of employment, continued employment, or the receipt of any employment-related benefit, require an applicant or employee to waive any right, forum, or procedure” for Fair Employment and Housing Act (“FEHA”) and Labor Code claims. Violations of the new statute carry hefty consequences, including criminal penalties. READ MORE →

AB 51 Update: Preliminary Injunction Granted

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On Friday January 31, 2020, Judge Kimberly Mueller of the Eastern District of California granted a preliminary injunction blocking the enforcement of California Assembly Bill 51 (AB 51) to the extent it applies to arbitration agreements covered by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. AB 51 makes it unlawful to require workers or job applicants to enter into mandatory arbitration agreements covering claims under the California Fair Employment and Housing Act or the California Labor Code as a condition of employment or to obtain employment benefits. READ MORE →

The TRO on AB 51 is Still in Effect Following Oral Argument – With Modifications and Supplemental Briefing On The Way

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On Friday, January 10, 2020, Chief United States District Judge Kimberly Mueller of the Eastern District of California heard oral argument on plaintiffs’ motion for preliminary injunction.  As a result of clarifications made at the oral argument, the temporary restraining order (TRO) has been modified from its broad applicability to only enjoin defendants from enforcing AB 51 to the extent it applies to arbitration agreements covered by the FAA.  The revised TRO will remain in effect until January 31, 2020, at which point we might have a ruling on the preliminary injunction.  Judge Mueller concluded the oral argument by providing both parties the opportunity to submit supplemental briefing on two issues:  (1)  jurisdiction/standing; and (2)  severability.  As to the latter issue, Judge Mueller indicated she would accept specific proposals related to how the arbitration-related sections of the statute might be severed if she decided to grant the injunction on FAA preemption grounds. READ MORE →

New California Employment Laws for 2020

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2020 is upon us, and with it, a slew of new employment laws that are now in effect. Read on for a description of 13 key employment laws every employer operating in California should know about going into 2020. For more information on these laws and advice regarding best practices, check out our California Employment Law Update Seminars taking place at our San Francisco office on January 9, 2020 and Silicon Valley office on January 22, 2020. READ MORE →

Try To Restrain Yourself: California Is Temporarily Restrained From Enforcing Arbitration Ban

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Remember California’s new ban on mandatory workplace arbitration agreements? The Eastern District of California has put it on ice, granting a temporary restraining order against the ban’s enforcement. As a refresher, and as we wrote about here, on October 10, 2019, California Governor Gavin Newsom signed into law California’s latest afront on workplace arbitration—AB 51. Under AB 51, employers may not, “as a condition of employment, continued employment, or the receipt of any employment-related benefit, require an applicant or employee to waive any right, forum, or procedure” for FEHA and Labor Code claims. Violations of the new statute carry hefty consequences, including criminal penalties. Many employers see arbitration agreements as necessary to manage employment disputes and an outright ban on this efficient process strongly affects their bottom line. The ban was scheduled to go into effect on January 1, 2020, but the TRO put enforcement on hold for now. READ MORE →

A Fair Victory? House Democrats Pass the FAIR Act to Limit Mandatory Arbitration

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In 2018, the U.S. Supreme Court issued its landmark decision in Epic Systems Corp. v. Lewis—a decision that upheld the validity of class action waivers in arbitration agreements (discussed in our prior post). Since then, Democrats lobbied to overturn that decision. In 2018, Democrats introduced H.R. 7109, entitled the “Restoring Justice for Workers Act” to outlaw class action waiver provisions in employment contracts. Although that bill died in Congress, Democrats continue to pursue the fight to prohibit “forced” arbitration agreements and class action waivers. READ MORE →

It’s Never Too Late: NLRB Rules Employers Can Update an Existing Mandatory Arbitration Agreement to Include a Class or Collective Action Waiver After Being Sued, and Can Warn Workers that Failure to Sign Will Result in Termination

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Arbitration agreements are a powerful tool in resolving employment actions.  As we noted last year, the U.S. Supreme Court ruled in a landmark case that employers can use class and collective action waivers in mandatory arbitration agreements.  The U.S. Supreme Court’s 5-4 decision in Epic Systems Corp. v. Lewis, No. 160285 (U.S. May 21, 2018), was authored by Justice Gorsuch, and settled the longstanding dispute over whether arbitration agreements containing class waivers are enforceable under the Federal Arbitration Act (FAA) despite the provisions of Section 7 of the National Labor Relations Act (the Act).

On August 14, 2019, the National Labor Relations Board (NLRB) issued Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), in which the NLRB sided with employers on two key arbitration questions following the Epic decision.  First, the NLRB found that an employer that is sued in a class or collective action can update its existing mandatory arbitration agreement to include a class or collective action waiver, barring workers from opting in to the pending litigation.  What’s more, the NLRB found that employers can warn workers that failure to sign the updated arbitration agreement will result in termination.

Employers can update an existing mandatory arbitration agreement to include a class or collective action waiver, even after workers have opted in to the collective action:

The NLRB first addressed the issue of “whether the Act prohibits employers from promulgating [mandatory arbitration] agreements in response to employees opting in to a collective action.”  In Cordúa Restaurants, Inc., Cordúa Restaurants had an existing mandatory arbitration agreement that required employees to waive their “right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act (‘FLSA’) collective action) in any civil court or arbitration proceeding,” but did not expressly prohibit opting in to collective actions.  Seven employees filed a collective action in the United States District Court for the Southern District of Texas alleging violations of the FLSA and the Texas Minimum Wage Act.  After thirteen employees opted in to the collective action, Cordúa Restaurants updated their existing mandatory arbitration agreement to expressly require employees to agree not to opt in to collective actions.  Although the NLRB, for purposes of the decision, assumed that opting in to a collective action constitutes protected concerted activity under Section 7 of the Act, it still found that promulgating the updated mandatory arbitration agreement in response to the opt-ins did not violate the Act.  The Board reasoned that Epic made clear that an agreement requiring that employment-related claims be resolved through individual arbitration, instead of class or collective action, does not restrict Section 7 rights in any way.

Employers can warn workers that failure to sign the updated arbitration agreement will result in termination:

The NLRB next tackled the issue of “whether the Act prohibits employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement.”  After updating the mandatory arbitration agreement to include the above provision against opting in to collective actions, Cordúa Restaurants needed to distribute and execute these updated agreements.  During a pre-shift meeting, an assistant manager distributed the updated agreement to employees and explained that employees would be removed from the schedule if they declined to sign it.  After a couple employees objected to signing the updated agreement, the assistant manager stated that he “wouldn’t bite the hand that feeds [him]” and that he would instead “go ahead and sign it.”  The NLRB reasoned that because Epic permits employers to condition employment on employees entering into an arbitration agreement that contains a class or collective action waiver, the assistant manager did not unlawfully threaten the employees.

Dissent:

The majority opinion was authored by Chairman John F. Ring, Member Marvin E. Kaplan, and Member William J. Emanuel.  Member Lauren McFerran authored a separate dissent, which disagreed with the majority on both issues and found that, “[t]he record here establishes that [Cordúa Restaurants] violated Section 8(a)(1) [of the Act] by imposing the revised arbitration agreement on employees, in response to their protected concerted activity and by threatening employees for protesting the revised agreement.”  Member McFerran reasoned that although Epic blessed the use of mandatory arbitration agreements with class or collective action waivers, promulgating a lawful rule or policy in response to protected concerted activity is prohibited under Board law.  Lastly, Member McFerran found that the employees exercised their Section 7 rights by protesting the updated agreement and the assistant manager unlawfully threatened them.

Takeaways:

In its news release, the NLRB recognized that Cordúa Restaurants, Inc. is its first decision concerning the lawfulness of employer conduct surrounding mandatory arbitration agreements since Epic.  It remains to be seen how state or district courts analyze a fact pattern such as this one, but this is a very encouraging development for employers if this is a sign of what’s to come from the NLRB.  The decision strengthens employers’ power to effectuate mandatory arbitration agreements—now before and during pending litigation.

#MeToo One Year Later – Employers’ Responses to the Movement

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On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano. To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective. Part 1 reviewed the movement’s impact on sexual harassment claims in the workplace, Part 2 focused on the legislative reaction to the movement, and Part 3 below discusses how employers have responded to #MeToo.

Over the past year, the #MeToo movement has caused a seismic shift in our culture that continues to ripple through important aspects of our daily lives, especially the workplace. As we previously discussed, the #MeToo movement’s growing momentum has sparked rising trends in sexual harassment claims and lawsuits, as well as a significant increase in EEOC charges and enforcement efforts. In the past year, the EEOC revealed that it filed 41 lawsuits with sexual harassment allegations, which is a 50 percent increase from 2017. In addition, litigation and administrative enforcement of sexual harassment issues yielded nearly $70 million to the EEOC in 2018, up from $47.5 million the prior year. But newly filed lawsuits or administrative charges only reveal a part of the impact – claims of sexual harassment may have a devastating effect on those accused of wrongdoing and their employers, even if they lie far beyond any applicable statute of limitations, as today’s claims often do. Employers of all shapes and sizes are acclimating their policies and practices for the #MeToo era, as none can avoid the categorical shift in workplace culture that is slowly becoming the “new normal.” READ MORE →

Epic News for Employers: Class Action Waivers in Arbitration Agreements are Enforceable

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Employers across the country started the work week with some positive and long-awaited news.  On Monday, May 21, 2018, the U.S. Supreme Court ruled in a landmark case that employment arbitration agreements with class action waivers do not violate federal labor law.  The Court’s 5-4 decision in Epic Systems Corp. v. Lewis, No. 160285 (U.S. May 21, 2018), consolidated with Ernst & Young LLP et al v. Morris et al., No. 16-300, and National Labor Relations Board v. Murphy Oil USA, Inc., et al. , No. 16-307, was authored by Justice Gorsuch, and settles the longstanding dispute over whether arbitration agreements containing class waivers are enforceable under the Federal Arbitration Act (FAA) despite the provisions of Section 7 of the National Labor Relations Act (NLRA).   READ MORE →

#MeToo—New York Poised to Ban Non-Disclosure and Arbitration of Sexual Harassment Claims

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On March 30, 2018, the New York State Assembly completed passage of the 2018-19 state budget.  Undoubtedly spurred by the #MeToo movement, the final budget measure, which is expected to be signed into law by Governor Andrew Cuomo, includes a bill (S. 7507–C/ A. 9507–C), containing several measures aimed at creating safer workplaces free of sexual harassment and abuse.  READ MORE →