What Could A Recent Decision On Class Action Waivers Mean For Employees?

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Although not all jobs require the completion of a binding employment contract, employers in sensitive or ultra-competitive industries may often require their employees to sign a noncompete contract or other type of legal agreement to restrict employees' behavior even after separating from employment. Some of these agreements include provisions prohibiting employees from banding together in a class action lawsuit against the employer, even if the employer engages in egregious behavior that violates the rights of all its employees. 

A recent split decision of a New York appellate court has held that such anti-class-action provisions violate the National Labor Relations Act (NLRA), teeing up this issue for the Supreme Court of the United States to tackle. Read on to learn more about what this important New York case addresses, as well as what a ruling from the SCOTUS could mean for employees who would like to pursue a class action lawsuit against an unscrupulous employer. 

What was decided by the New York appeals court?

In an opinion that divided justices among partisan lines, the Manhattan Appellate Division, First Department issued a ruling indicating that waivers of the right to sue under a class action lawsuit violated the NLRA's protections of workers' rights to assemble. While these NLRA protections are most often implicated in union creation and negotiations, they apply to all workers equally, even those who aren't covered by a union or collective bargaining agreement. The NLRA prevents employees from being fired or suffering other adverse employment action for peaceably assembling, whether this assembly is designed to help create a union or to file a class action unpaid wage lawsuit. 

This case arose when certain insurance workers were required to waive their right to sue in favor of binding arbitration; when these workers sought compensation for unpaid overtime and pursued class certification so that the claims could be combined, their employer denied this request and pointed toward the arbitration provision in their employment contracts. Rather than permitting employees to act as a collective body in seeking unpaid wages, this arbitration provision meant that each individual employee would be required to bring his or her unpaid wage case before an arbitrator, not a judge, eliminating their right to appeal. 

Several justices dissented from this decision, pointing to the Federal Arbitration Act for guidance. These justices argued that this Act, which provides employers with the right to require arbitration (rather than litigation of claims) superseded any state laws restricting the ability to force employees into arbitration. 

What could a SCOTUS reversal mean for employees? 

Some analysts point toward the relatively conservative skew of the SCOTUS as evidence that the court is more likely to reverse than uphold the ruling of the New York appeals court. However, the SCOTUS has not yet scheduled oral argument in this case, which means any resolution is likely months--if not years--away. 

The ultimate SCOTUS decision will likely require the Court to decide whether to expand its prior split ruling in AT&T Mobility v. Concepcion, a case that held that the Federal Arbitration Act superseded state laws that prevented employment contracts from requiring class action arbitration in lieu of litigation. Justice Scalia, recently replaced by Justice Gorsuch, wrote the majority opinion in AT&T, which has led some to the belief that the SCOTUS is likely to expand this ruling to permit class action waivers in employment contracts as well. Such a ruling would render employees without much recourse (or the right to appeal) in a situation where the employer had already made itself vulnerable to a lawsuit, so the ultimate SCOTUS decision may have a significant ripple effect nationwide.

If you believe you may have a case against your workplace, whether it's similar to this or not, you should reach out to a law firm, such as Richards & Minore, P.C.