WELA ALERT: Case Update

Morris v. Ernst & Young, LLP, — F.3d — (9th?Cir. 8/22/16) (Thomas, Hurwitz, Ikuta)

In this case, the Ninth Circuit weighed in on an issue that is bound for the U.S. Supreme Court. The employer required employees to sign an agreement (1) requiring arbitration and (2) requiring individual arbitration proceedings. The net effect was that employees cannot bring concerted legal claims, such as a class action, collective action or a group action, against the company in any forum. The plaintiffs filed a class and collective action under the FLSA and California law. The district court granted the company?s motion to compel arbitration.

The Ninth Circuit reversed. The Court held that the NLRB?s determination in several decisions that class/collective/group action waivers violate section 7 of the NLRA was entitled to deference. Section 7 guarantees ?employees? under the Act the right to engage in concerted activity. Decades of NLRB and Supreme Court precedent had held that legal actions were a form of protected concerted activity. Because employees had a substantive right under the NLRA to engage in concerted legal activity, the employer?s requirement that employees waive that right as a condition of employment was unlawful under the NLRA.

The majority held that the Federal Arbitration Act did not dictate a different result. Because the arbitration agreement prohibited concerted legal activity regardless of the forum, the contract was illegal under the NLRA. The FAA does not permit the waiver of substantive federal rights or permit ??the ??enforcement ?of ??illegal ?contractual?provisions. The majority held there was no conflict between the FAA and the NLRA.

The dissent argued that the right to file a class action was merely procedural and therefore could be waived by an arbitration agreement. Judge Ikuta held that the NLRA does not create a substantive right to class-wide litigation that is contrary to the mandate of the FAA.

The Seventh Circuit is in accord with the majority?s opinion. The Second, Fifth and Eighth Circuits have gone with the dissent?s analysis.