Class Action Waivers in Employment Law

By Corey Hanrahan

For some time, in California, it was unclear whether class action waivers in employment arbitration agreements were enforceable. In 2006, in Morris, et al. v. Ernst & Young, LLP, the United States Court of Appeals for the Ninth Circuit held that class action waivers contained in arbitration agreements violated the employees’ right to engage in concerted activity, in violation of the National Labor Relations Act (NLRA). Therefore, they were unenforceable. 

“…a bar to bringing class claims in arbitration can be either express, or implied, in an arbitration agreement…”

However, the United States Supreme Court ruled, in Epic Systems Corp. v. Lewis, that employment arbitration agreements that precluded class action cases were enforceable, and did not violation the NLRA. Therefore, until California bans these types of agreements as being unenforceable under California law, employers have the power to force employees to waive the right to bring representative actions. 

Unfortunately for employees, a bar to bringing class claims in arbitration can be either express, or implied, in an arbitration agreement. California law (as well as Federal law) has found that an employer cannot be compelled under the Federal Arbitration Act to submit to class arbitration absent a contractual basis for concluding the party agreed to do so. In 2012, the California Court of Appeal held, in Kinecta Alternative Fin. Solutions, Inc. v. Superior Court, that an arbitration agreement stating that the employee agreed to use “binding arbitration to resolve all disputes that may arise out of the employment context” precluded the employee’s right to bring class claims. The Court of Appeal reasoned that the arbitration agreement made no reference to, and did not authorize, class arbitration. 

Determining whether an arbitration agreement bars the right to arbitration class claims requires an analysis from a knowledgeable employment attorney.