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U.S. Ninth Circuit Adds to Class Action Waiver Confusion

by Bryan Little, Farm Employers Labor Service

On August 22, the U.S. Ninth Circuit Court of Appeals ruled in Morris v. Ernst & Young, that requiring a potential employee to sign an arbitration agreement that waives the employee's ability to pursue claims on a class or collective basis and instead requires that all claims be resolved on an individual basis in arbitration is a violation of the employee's rights under National Labor Relations Act (NLRA).  The NLRB first asserted this interpretation of the NLRA in 2012 in a case involving D.R. Horton, a major home builder.  The NLRB's D.R. Horton opinion has been rejected by several U.S. appellate courts and California state courts similarly have also enforced class action waivers in employment arbitration agreements.  This decision will not directly impact agricultural employers who are covered by California's Agricultural Labor Relations Act (ALRA) but could impact employers in related businesses that are not NLRA-exempt as well as businesses that agricultural employers depend on for transportation and other support services. 

This ruling by the U.S. Ninth Circuit ruling creates new uncertainty for California employers seeking to enforce arbitration agreements with their employees.  Enforceability of a class action waiver will now depend on whether the case is in California state court or in a federal court located in California.  If in California state court, the court likely will enforce a class action waiver in an arbitration agreement.  California federal courts, however, are bound to follow Ninth Circuit precedent and will not be able to enforce a class waiver in an arbitration agreement unless the facts of the case are meaningfully different than those in the Ernst & Young case.  

The disagreement among federal Circuit Courts will likely result in review by the United States Supreme Court.