Class Action Waivers in Employment Arbitration Agreements

Class Action Waivers in Employment Arbitration Agreements

Class action waivers in employment arbitration agreements have gained widespread popularity with employers following the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and American Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013). This is because the ability of Plaintiffs to challenge arbitration clauses containing class action waivers has been eroded greatly. What is absolutely clear following these cases is that plaintiffs’ attorneys cannot successfully challenge arbitration agreements on the sole basis that they contain class action waivers, but there are creative arguments to make.

Does the Arbitration Agreement Contain a Class Action Waiver?

While it may be so simple that it gets overlooked, the first place to start is to determine whether or not the arbitration agreement contains a class action waiver. If there is no class action waiver, but there is an arbitration agreement, then it does not put your client in a poor strategic position to move forward with the class arbitration.

If the arbitration agreement does not expressly specify whether class wide arbitration is permitted and there is no language expressly precluding class arbitration, then you are still able to proceed on a class-wide basis. Employers will argue that in the case of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) the Supreme Court ruled that class-wide arbitration is not permitted in such situations. Essentially, Employers will argue that if the arbitration agreement does not expressly authorize class arbitrations, then they are not allowed. However, in Stolt-Nielsen the parties had agreed that they had not reached an agreement on the issue of class arbitrations. That is, the plaintiffs conceded that the agreement was “silent” regarding whether it would allow for class actions. Therefore, the Court held that “[a]n implicit agreement to authorize class-action arbitration…is not a term that the arbitrator may infer solely from the fact of the parties’ agreement to arbitrate.” The Court further held at p. 684 that a “silent” agreement was one in which the parties “had reached no agreement on th[e] issue” of class arbitration and thus such an agreement must be interpreted to preclude it. Plaintiffs can still successfully argue that class action claims are included in arbitration agreements where the language states that “all claims” or “any claims” are covered by the arbitration agreement. Plaintiff’s counsel should refer to these agreements as “not expressly stating” whether class actions are permitted, and then make contractual arguments as to why class actions should be allowed. The focus of the plaintiff’s argument should be the same as in any arbitration case, the text of the arbitration agreement and most importantly, plaintiff’s counsel should never refer or argue that the arbitration agreement is “silent” regarding arbitration of class claims.

Who Decides Whether the Arbitration Agreement Permits Class-Wide Arbitration: the Arbitrator or the Court?

According to the Sixth Circuit, the question of whether an arbitration agreement allows for class proceedings is a gateway question of arbitrability presumptively for the courts to decide, although the Circuits are split and the Supreme Court has not answered the question. Reed Elsevier, Inc. v. Crockett, 734 F.3d 594, 599 (6th Cir. 2013) (“the question whether an arbitration agreement permits classwide arbitration is a gateway matter, which is reserved ‘for judicial determination unless the parties clearly and unmistakably provide otherwise’”). Of course, there is nothing for the Court to decide if the parties’ agreement clearly and unmistakably assigns the question of classwide arbitration to the arbitrator. In that regard, several courts have held that, where an arbitration agreement references the AAA rules, the parties have evinced their intent to let the arbitrator decide the availability of class-wide arbitration procedures (because the AAA rules expressly provide that the arbitrator will determine the question).

To learn more about class action waivers and suits for overtime compensation, contact the Law Office of Charles S. Herman.