Arbitration|Courts|Employment

Waiver of Class Action Without Arbitration Provision

In considering the debates raging about the enforceability of class action waiver provisions in arbitration clauses, I have always assumed that the arbitration clause was there just as a vessel to hold the class action provision.  That is, I thought that there was no vehicle to waive class actions outright.  Indeed, I once wasted a good portion of my not-much-remaining youth trying to find any instance where a party to a contract included a waiver of FRCP 23 while contemplating litigation, and I couldn’t find one.

Well, I wan’t looking in the right places.

Many thanks to Karl Bayer, whose indispensable blog Disputing.com has alerted us to an appeal before the Fifth Circuit Court of Appeals that was argued earlier this week.  In Convergys Corporation (363 NLRB No. 51, Nov. 30, 2015), an employer was found to have violated  Section 8(a)(1) of the National Labor Relations Act by requiring employees, as a condition of employment, “to agree that they would not pursue any claim or lawsuit relating to their employment on an individual basis.”  The rule was found unlawful because it explicitly restricts activities protected by Section 7 of the Act.  Noted the Board:

The Board has long and consistently held, with uniform judicial approval, that the Act protects the right of employees to join together to improve their terms and conditions of employment through litigation.  Accordingly, by requiring employees to waive their right to engage in class or group litigation as a condition of employment, the Respondent has interfered with their Section 7 right and violated Section 8(a)(1) of the Act.

Two things spring to mind.  The first is that the NLRB’s rulings in previous cases such as D.R. Horton were in the context of class action waivers embedded in arbitration clauses, and judicial challenges to the Board’s findings were couched in terms of federal support for agreements to arbitrate (assuming, arguendo, that these are agreements rather than unilaterally promulgated policies of employment, and assuming further that the employer’s policy was intended to ensure arbitration rather than to prohibit class actions).  Without the decades-old pro-arbitration judicial policy to rely upon, the employer here  may be less protected from challenge.

The other issue is that, in the event the NLRB’s Decision and Order is upheld, it will necessarily be restricted to agreements of employment.  Other efforts to restrict individual protections afforded by Rule 23, such as consumer, financial, nursing home, and other “agreements,” would of course remain unaffected by the Fifth Circuit’s actions.

The CFPB is acting to eliminate class action waivers in arbitration clauses in consumer financial transactions, and recent word has it that the Obama administration is acting to make entire arbitration provisions unenforceable in nursing home contexts.  Maybe the game of inserting class action waivers, with or without arbitration clauses, has about run its course?

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