9th Circuit Denies Ernst & Young Class Arbitration Waiver

On August 22, 2016, the Ninth Circuit decided that provisions in contracts barring employees from seeking class action litigation against employers over hours, wages and employment terms and conditions violate the National Labor Relations Act (NLRA).[1]  According to the complaint, the employees were forced to sign a “concerted action waiver” where they were required to pursue legal claims against the employer, Ernst & Young LLP, exclusively through arbitration and to arbitrate only as individuals and in “separate proceedings.”[2]  The Northern District of California upheld the provision as valid, thus ordered individual arbitration, and dismissed the case.[3] However, the Ninth Circuit, upon hearing the case, concluded that this specific provision violated the NLRA.[4]

Judge Sidney R. Thomas, writing for the majority, stated that the issue was not whether requiring the arbitration clause was invalid, rather the issue was whether the provision of the contract defeated a substantive federal right of the employees to seek concerted work-related legal claims.[5] The opinion cited the National Labor Relations Board’s (NLRB) conclusion that an employer violates the NLRA “when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial.”[6]

This determination reflects decisions from the Seventh Circuit, such as Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), where the court concluded that collective and class waiver provision of the contract violated the NLRA. However, the Fifth Circuit’s previous decisions ruled in favor of the employer stating that this kind of agreement was legal. This split in the Circuits could mean that the United States Supreme Court may grant certiorari if any of the decisions by the Circuit courts is appealed. It would be interesting to see what the Supreme Court will rule in this matter where they may determine that the right to collective and class action may or may not be a fundamental right of the employees.

~Author: Yu Up Lee, Emory School of Law 3rd Year Law Student

[1] Morris v. Ernst & Young, LLP, No. 13-16599, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016).

[2] Id. at 4.

[3] Id. at 5.

[4] Id. at 4.

[5] Id. at 18.

[6] Id. at 6.