The enforceability of class action waivers was one of the bigger stories in 2011. To illustrate, our sister blog – The Employment Class Action Blog – had at least 10 posts last year on developments involving the application of the Supreme Court’s decision in AT&T Mobility v. Concepcion. As you may recall, that 5-4 decision held that California’s Discover Bank rule was preempted by the Federal Arbitration Act and, as a consequence:
Courts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.
While encouraging hospitality companies to adopt class action waiver provisions after Concepcion, we also anticipated that the holding would be challenged through various means, including the introduction of legislation, agency rulemaking, and plaintiff lawyers’ arguing for the equivalent of “pre-existing legislative overrides.” With respect to the latter, we pointed out that the Supreme Court had already granted certiorari in CompuCredit Corp. v. Greenwood. In that case, the Ninth Circuit held that an arbitration agreement could not be enforced under the FAA because another federal law (the Credit Repair Organization Act) provided that a plaintiffs’ right to sue in court could not be waived.
The importance of the yet-to-be-issued decision in CompuCredit was highlighted by the National Labor Relations Board’s January 6 ruling in D.R. Horton and Michael Cuda, a decision that impacts both union and non-union workforces. As reported by John Lewis at The Employment Class Action Blog, the NLRB found that Section 8(a)(1) of the National Labor Relations Act was violated because the company required that all employment-related disputes be resolved through individual arbitration. According to the NLRB, “an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7″ of the National Labor Relations Act. “Such conduct is not peripheral but central to the act’s purposes.” “If the [NLRA] makes it unlawful for employers to require employees to waive their right to engage in one form of activity, it is no defense that employees remain able to engage in other concerted activities.”
We have reported previously on the hospitality industry’s struggles with tip claims and employee classification claims – these would seem to support the protective use of class action waivers and arbitration by employers. However, the effectiveness of such provisions may ultimately be determined by the Supreme Court’s decision in CompuCredit v. Greenwood. That decision may favor employers by setting an impossibly high standard for how clearly a federal statute must express an intent to nullify arbitration agreements. Alternatively, that decision could create an exception loved by the plaintiffs bar.