Requiring class and collective action waivers as a condition of hire or continued employment violates the National Labor Relations Act (“NLRA”), the Ninth Circuit Court of Appeals ruled on August 22, 2016.
In April 2011, the U.S. Supreme Court ruled that class claims can be waived in a valid arbitration agreement under the Federal Arbitration Act (“FAA”). Many employers have since entered into such agreements with their employees. The National Labor Relations Board, however, takes the position that prohibitions against class or collective proceedings violate an employee’s rights to engage in protected concerted activity for mutual aid and protection under Sections 7 and 8 of the NLRA.
Essentially following the Seventh Circuit’s reasoning in a decision earlier this year, and deferring to the NLRB’s interpretation of the NLRA, the Ninth Circuit has now held that employees have a substantive right to pursue work-related legal claims and to do so together. It also concluded that employers cannot defeat such rights by requiring employees, as a condition of employment, to agree to pursue claims on an individual basis. Other courts, however, including the Second, Fifth and Eighth Circuits, have concluded that class and collective action waivers do not violate the NLRA.
The future of class, collective, and representative action waivers is uncertain. Within the Ninth Circuit (which has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington), it remains to be seen whether the matter will be heard en banc by the full Ninth Circuit Court of Appeals. If the decision stands, the split on this issue is significant, and the matter is ripe for U.S. Supreme Court review. Many of the Supreme Court’s decisions regarding class action waivers have been based on five-to-four rulings, where the late Justice Antonin Scalia represented one of the five votes favoring class waivers. Accordingly, the Supreme Court’s composition likely will affect the fate of class action waivers and the outcome of the dispute among the circuits.