A new decision from the U.S. Court of Appeals for the Ninth Circuit continues to leave employers uncertain as to the enforceability of class action waivers in arbitration agreements. The Seventh and Ninth Circuits are on one side of the issue, and the Second, Fifth, Eighth, and Eleventh Circuits on the other. The Seventh and Ninth Circuits are following the National Labor Relations Board’s (NLRB) position that class action waivers infringe on an individual’s rights under the National Labor Relations Act (NLRA). The new Ninth Circuit decision makes it more likely that the United States Supreme Court will grant review and end the battle between the circuits. In the interim, class action waivers will not be enforced in federal courts in Illinois, Indiana, Wisconsin, California, Arizona, Nevada, Oregon, Idaho, Montana, Washington, Alaska, and Hawaii, the states within the Seventh and Ninth Circuits’ jurisdiction.
The Ninth Circuit, in Morris v. Ernest & Young, LLP, No. 13-16599, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016), became the second appellate court to invalidate mandatory class waivers in arbitration agreements. The Seventh Circuit was the first circuit to invalidate a class or collective action waivers in an arbitration agreement in Lewis v. Epic Systems Corporation, 823 F.3d 1147 (7th Cir. 2016), where the court held that when an employer conditions continued employment upon the signing of a class or collective action waiver in an arbitration agreement, the agreement violates the NLRA and is unenforceable under the Federal Arbitration Act (FAA).
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