Cross-posted at WLF’s Forbes.com contributor site
Despite the Supreme Court’s recent affirmation that arbitration agreements must be enforced by their terms (AT&T Mobility v. Concepcion), some courts continue to go to great lengths to avoid them. Take for instance the California Court of Appeal that recently held an arbitration agreement unenforceable because it wasn’t signed, despite that the employee was herself tasked with obtaining signed arbitration agreements from the other employees, she represented to the company that she had signed it, and the company had required she sign it as a condition of her employment.
Of course, the National Labor Relations Board (NLRB) made it easier for judges to flout the Supreme Court’s decision in Concepcion when it ruled in D. R. Horton Inc. that to include a mandatory class arbitration waiver in an employment agreement is to commit an unfair labor practice, as it violates the employees’ right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection..”.
Recently in Convergys Corp., an NLRB Administrative Law Judge (ALJ) not surprisingly followed D. R. Horton Inc., and struck down a class action waiver contained within the plaintiff’s employment application. The plaintiff had filed a case based on the company’s alleged failure to reimburse her for work related tasks, including such time-consuming endeavors as “booting up computers, logging into and out of various computer programs and applications, and reading company communications.” One envisions an employee punching a time clock for her time spent punching a time clock. The ALJ made short shrift of the employee’s class waiver, indicating he was bound to follow D. R. Horton. Nevertheless, the opinion explicitly left open the possibility that non-coercive waivers not instituted as a condition of employment were permissible under D. R. Horton.
Notwithstanding this interpretation, another ALJ held in 24 Hour Fitness USA, Inc., that even a noncoercive class waiver constitutes an unfair labor practice. 24 Hour Fitness had included an arbitration waiver in its employee handbooks, but offered employees a time frame to opt-out. The ALJ repeatedly characterized 24 Hour Fitness’ actions as an effort “to establish an employer’s right to restrict employees, in order to hold a job, from exercising their statutory right to use the full-range of legal remedies generally available to all citizens.”
It’s difficult to argue that a provision is mandatory where one has the capacity to opt-out of it. Thus, the ALJ’s interpretation further erodes the freedom to contract in holding that employers cannot design contracts that alter employees’ statutory rights to collective bargaining, even if the employees voluntarily agree to enter those contracts by choosing not to opt out.
Fortunately, two cases on appeal to the United States Supreme Court and the California Supreme Court offer opportunities to return once again to the road less traveled, though more grounded in law. In American Express Co. v. Italian Color Restaurant, the Court will decide whether there is a loophole in Concepcion that allows a plaintiff to avoid their commitment to class arbitration where a class action is the “only economically feasible means” of pursuing his or her claim.
In Iskanian v. CLS Transportation, the California Supreme Court will resolve a split among California courts regarding the continued viability of state case law that undermines class arbitration waivers. Iskanian is notable because not only did the appellate court deem the class waiver enforceable, it further deemed D. R. Horton incorrectly decided, and extended Concepcion to PAGA claims (suits brought under the California Private Attorney General Act.) Nevertheless, it is unclear if merely another Supreme Court decision will convince lower courts to respect the federal policy favoring arbitration.