April 28, 2016

Wavering on Class Action Waivers in Arbitration Agreements

Last week’s enormous settlements of up to $100 million in class action cases against Uber were reminders of the ongoing opposition to class action and other joint action waivers in arbitration agreements. The same is true of recent filings in a case involving the National Labor Relations Board (NLRB), which also challenge the validity of class action waivers in arbitration agreements. This trend has emerged despite the Supreme Court consistently upholding the enforceability of such provisions in recent well-publicized decisions like DirectTV, Inc. v. Imburgia (December 2015).

Specifically, in the Uber cases, Uber’s drivers directly challenged the enforceability of the arbitration agreements that Uber requires its drivers to sign. The cases, O’Connor v. Uber Technologies Inc. and Hakan Yucesoy v. Uber Technologies Inc., were rapidly winding their way through California’s federal courts—and muddying the legal landscape on this issue—until a week ago when the parties settled. In O’Connor, for example, the U.S. District Court for the Northern District of California concluded that the arbitration agreements were unenforceable due to their waivers and it certified a subclass, but then the Ninth U.S. Circuit Court of Appeals granted Uber permission to appeal the district court’s decision.

Similarly, this month, the NLRB asked the Fifth U.S. Circuit Court of Appeals to reconsider its earlier ruling in Murphy Oil USA Inc. v. NLRB. , which held that class action waivers in arbitration agreements were lawful and do not violate the National Labor Relations Act. The NLRB argued, in part, that the Court misread Supreme Court precedent on the Federal Arbitration Act. Although the Fifth Circuit previously denied a similar NLRB Petition in D.R. Horton, Inc. v. NLRB, the NLRB’s request shows its ongoing efforts on these issues.

Cases like the Uber and NLRB cases could have a significant impact on the enforceability of class action waivers in arbitration agreements. Employers should keep an eye on the legal landscape in this area, particularly those in states in the Fifth and Ninth Circuits. As a result, employers, along with counsel, must carefully draft any arbitration agreements and class action waivers, making sure that the language is clear and that it is up to date given the constantly evolving law on these issues.

For more on cases involving arbitration agreements and class action waivers, read Navigating Class Action Waiver Law, authored by Faegre Baker Daniels partners Alison Fox and Andrew Murphy.

This legal update was updated on May 2, 2016.

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