As evidenced by some recent federal court decisions, employers should be carefully considering the benefits of implementing mandatory arbitration provisions, which include waivers of the right to bring a class action, for all employment-related claims. In Dauod v. Ameriprise Financial Services, Inc., Case No.: 8:10-cv-00302 (D.C. Cal. 10/12/11), employees sought to bring a class action alleging various wage hour violations. Relying on the U.S. Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion (http://tinyurl.com/6azuf4n), discussed in the May 10, 2011 edition of Legal News: Employment Law Update, the California federal court dismissed the class action and instead forced each plaintiff to arbitrate his or her claims individually.
Similarly, in Doe v. Princess Cruise Lines, Ltd., an arbitration agreement between a bar server and the cruise ship on which she worked was enforced as to plaintiff’s Jones Act (shipboard workers’ compensation) and Seaman’s Wage Act claims.
These cases reinforce the trend that courts are upholding well-drafted arbitration agreements between employers and employees, preventing employees from having a jury trial and also precluding them from bringing class actions. When such agreements are enforced, employees are relegated to having their cases heard on an individual basis in arbitration.
Employee rights advocates argue that such mandatory arbitration provisions and class action waivers unfairly deny employees their rights. Congress has taken notice and on October 13, 2011, the U.S. Senate Judiciary Committee held hearings entitled, “Arbitration: Is It Fair When Forced?” The hearing was chaired by Senator Al Franken, who introduced the Arbitration Fairness Act following the Supreme Court’s decision in Concepcion. This law, if passed, would make it impossible to enforce any pre-dispute mandatory arbitration provision over employment and consumer disputes. The law would not, however, invalidate arbitration provisions contained in collective bargaining agreements.
All employers should be carefully analyzing the pros and cons of implementing mandatory arbitration provisions for all employment-related disputes. Given the veritable explosion of class action wage and hour litigation, waivers of the right to bring a class action law suit also should be examined. When mandatory agreements combine both, it can be a powerful weapon to limit claims. Like everything else in the law, careful planning, drafting, and implementation are the keys to successful enforcement of such agreements.