The law of employee class action waiver has, to date, been entwined in the law of arbitration. Agreements to arbitrate being heavily favored, courts have been reluctant to refuse to enforce agreements to arbitrate that also included agreements not to engage on collective remedies such as class actions. Now, the Fifth Circuit has enforced a contractual employee class action waiver that appeared as an independent provision of the terms and conditions of employment.
The case is Convergys v. NLRB. There, the employer required job applicants to agree to the following:
I further agree that I will pursue any claim or lawsuit relating to
my employment with Convergys (or any of its subsidiaries or
related entities) as an individual, and will not lead, join, or serve
as a member of a class or group of persons bringing such a claim
or lawsuit.
An employee brought a claim in federal district court alleging class-wide violations of the Fair Labor Standards Act, and also filed charges with the NLRB claiming that the policy requiring class action waiver violated Section 7 of the National Labor Relations Act (which protects an employee’s right “to engage in other concerted activities for the purpose of … mutual aid or protection”). The company successfully dismissed the class action, and settled the claim on terms that included the claimant’s seeking withdrawal of the NLRB charge. The NLRB, however, issued a complaint and accepted the ALJ’s recommended finding that the policy violated Section 7 rights of collective action.
On appeal the Fifth Circuit followed its own precedent by deeming class actions to be a procedural option , rather than substantive right. Moreover, it concluded that it previous rationale was based on an analysis of NLRA Section 7, not on the Federal Arbitration Act, and thus had continuing applicability regardless of whether the class action waiver was part of an arbitration agreement or freestanding. Because Section 7 does not protect the right to participate in class action litigation, a waiver of that right does not constitute a violation of Section 7.
One wonders, rhetorically, given the conclusion that Section 7 does not contemplate workers’ acting collectively and concertedly to vindicate statutory rights under the FLSA, exactly what non-union concerted worker activity Section 7 does protect. The employer’s mandatory waiver is pretty broad and clear, and expressly bans only one thing: collective and concerted activity in challenging terms of employment. The court’s conclusion seems to be a pretty enticing invitation.