It was less than a year ago that the Supreme Court ruled that employees could be required to individually arbitrate claims (and waive their right to participate in a class action), but arbitration agreements aren’t a silver bullet. In fact, some employers are responding to local legislation and employee resistance by pulling back from arbitration requirements.
Just last week, Google responded to employee protests and announced that it would no longer require its workers to arbitrate employment related claims. Read more about Google’s decision here.
Whether or not employee arbitration agreements make sense is a very company-specific decision. Think carefully about what you’re trying to accomplish with these agreements and talk to your legal counsel about the risks and benefits.
As a follow up to our post last year, this week, in a 5-4 decision, the Supreme Court rejected the National Labor Relations Board’s position that class waivers in arbitration agreements violate federal labor law. The Court held that employers can legally require their employees, as a condition of employment, to agree that they will not pursue class action claims against their employers, but rather address legal issues through individual arbitration.
Writing for the majority, Justice Neil Gorsuch stated simply that, “The [Federal] Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” In support of the decision, he compared the “simplicity and inexpensiveness” of arbitration to “slower, more costly” class actions, which are, in the view of the majority, “more likely to generate procedural morass than final judgment.”
The effects of the decision remain to be seen – Justice Ginsberg read her dissent from the bench, calling for Congress to address the matter. For now, though, employers with arbitration agreements in place will want to add a class-action waiver, and those that do not use arbitration agreements at all may want to reconsider that approach.
Last month, the Supreme Court agreed to resolve a circuit split over whether class action waivers — mandating that any claims brought against the employer be brought individually rather than as a class — contained in employment arbitration agreements violate employees’ rights under the National Labor Relations Act. The Court recently announced that it would decide the highly-anticipated case in its 2017 term, beginning in October. Both the Seventh and Ninth Circuits have struck down class action waivers in arbitration agreements. The Fifth, Second, and Eighth Circuits have held the opposite. We will update when the Supreme Court has made its decision. In the meantime, companies should consider the rule in their circuit before rolling out new employment arbitration agreements.
As we have blogged about before (see related post links below), the EEOC has said one of its priorities is to challenge separation agreements that, in its view, interfere with the ability of employees to file charges with the EEOC or participate in investigations.
On December 2, the EEOC’s efforts in this area took another hit. A Colorado judge tossed out the EEOC’s claims against CollegeAmerica Denver Inc. relating to the company’s separation agreements, although the judge permitted the EEOC’s claims of retaliation to move forward. EEOC v. CollegeAmerica Denver Inc. The court ruled that the EEOC had not made an adequate effort to conciliate the claims relating to the separation agreements.
Earlier this year, a similar case against CVS also was dismissed on other grounds before the court addressed the separation agreement issue. The EEOC recently appealed the CVS decision to the 7th Circuit.
And it’s not just about separation agreements anymore either; in September, the EEOC sued Doherty Enterprises for using pre-employment arbitration agreements that allegedly interfered with the rights of employees to file charges and participate in investigations. EEOC v. Doherty Enterprises Inc.
Though the EEOC hasn’t had much success in court to date, companies should review their separation and arbitration agreements to ensure that they carve out employee rights relating to the EEOC process. Otherwise, they risk ending up in the EEOC’s cross hairs.
On March 21, 2014, the Eleventh Circuit Court of Appeals (which covers Alabama, Florida, and Georgia) became the fifth federal circuit court to reject arguments against arbitration agreements containing class waivers, joining the Eighth, Second, Fifth, and Ninth circuits in enforcing such agreements.
In the Eleventh Circuit case (Walthour v. Chipio Windshield Repair), employees brought a class action alleging their employer violated the Fair Labor Standards Act by not paying them required minimum and overtime wages. The defendants moved to compel arbitration, citing agreements the plaintiffs had signed which stipulated that all employment disputes were to be resolved through individual arbitration. In the end, the court sided with the employer and the lower court, ruling that the arbitration agreements were enforceable and that the class action could not move forward.
As discussed in our earlier post Tide Continues in Favor of Class Action Waivers in Arbitration Agreements, more employers are using these types of agreements to reduce the risk of class claims. The Walthour decision continues a trend of court cases in favor of the agreements.
There are advantages and disadvantages to arbitrating disputes with employees, but for employers that fear class claims, either because of the nature of their workforce or their industry, arbitration agreements can make a great deal of sense.
In a long awaited decision in the D.R. Horton case, the 5th Circuit Court of Appeals ruled yesterday that an employer was within its rights to require employees to sign an arbitration agreement that mandated individual arbitration (i.e. not allowing for class claims). The National Labor Relations Board had taken the position that employees’ right to engage in concerted activity means that they cannot waive their right to participate in class or collective litigation or arbitration. The court disagreed, finding that the Federal Arbitration Act required that the arbitration agreement be enforced as written. This is a significant win for employers that seek to avoid class and collective actions by requiring employees to sign arbitration agreements that require that claims be brought individually. Employers using or considering such agreements should take heed, though, at the court’s finding that arbitration agreements need to make clear that they do not prohibit an employee from filing charges with the NLRB.
This year, LP’s Labor & Employment attorneys tried something different with our annual “Employment Law Update” and hosted the program as a webinar. The new format allowed us to record this year’s program and make it available for all our blog friends, colleagues and clients who were unable to participate. LP labor and employment attorneys Peter Donati, Laura Friedel and Kenneth Kneubuhler highlighted recent updates in labor and employment law and tips to keep your workplace practices current.
You can find the recording here and the presentation materials here.
To give you an idea of what topics are covered in this year’s “Employment Law Update” here are the topics we discussed:
•The impact of recent Supreme Court decisions on supervisor liability and the burden of proof for retaliation claims
• Trends involving arbitration agreements: Will they prevent class claims? Should your business be using them?
• Same sex marriage: How it affects employee rights under the FMLA and benefit plans
• Recent Illinois cases involving non-compete agreements. Will your agreements be enforceable when you need them?
• New developments at the National Labor Relations Board that affect both union and non-union workplaces
• How to properly use background checks to avoid scrutiny by the EEOC and avoid violating state laws
• Current wage and hour issues, including developments involving interns and independent contractors
• Other important state law trends, including laws on concealed weapons, medical marijuana, and social media passwords