Update Regarding Validity of Arbitration Agreements Waiving Class Claims

Earlier this year, the National Labor Relations Board ("Board") issued a decision outlawing mandatory arbitration agreements that require employees, as a condition of employment, to waive class claims in arbitration or court. See 357 NLRB No. 184 (Jan 3. 2012). Since then, the Board's General Counsel ("GC") issued a notable complaint and courts have issued several decisions that, collectively, are clarifying the contours and limitations of the Board's decision.

Recently, the GC sought to expand the scope of the Board's prior decision by filing a complaint against 24 Hour Fitness, USA, Inc., alleging that the fitness chain unlawfully required employees to waive class claims, even though the employees were given thirty (30) days to opt-out of the waiver, a fact not present in the prior case before the Board. This difference is not insignificant because, in at least two of the cases the GC cited as examples of 24 Hour Fitness’ attempts to enforce its arbitration policy, the courts had found in favor of 24 Hour Fitness, citing the opt-out provision.

In contrast to the GC’s efforts to expand the Board's recent decision, several courts have narrowly interpreted or flatly rejected the Board’s recent decision when considering the validity of class waivers.

• In Johnmohammadi v. Bloomingdale's, Inc., No. CV 11-6434 (C.D. Cal. Jan. 26, 2012), the court expressly distinguished the Board’s decision and enforced an arbitration agreement that, like the 24 Hour Fitness agreement, contained a thirty (30) day opt-out provision.

• In Herrington v. Waterstone Mortgage Corp., 2012 WL 1242318 (W.D. Wis. Mar. 16, 2012), the court determined that an employer’s arbitration agreement was invalid based on the Board's decision to the extent it prohibited class claims in any forum, but nevertheless upheld the agreements in part by compelling the plaintiffs to submit their claims to arbitration, on either an individual or a collective basis.

• In Jasso v. Money Mart Exp., Inc., 2012 WL 1309171 (N.D. Cal. Apr. 13, 2012). the court attempted to reconcile the Board’s decision with the Supreme Court’s subsequent decision in CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), which held that courts are required to enforce agreements to arbitrate according to their terms under the Federal Arbitration Act (FAA) unless the FAA’s mandate has been overridden by a contrary congressional command.
  
  The Jasso court explained that, “there is no language in the NLRA (or in the related Norris–LaGuardia Act) demonstrating that Congress intended employees' concerted rights under the NLRA to override the mandates of the FAA.” Thus, the court declined to follow the Board’s decision and, instead, compelled the plaintiffs to arbitrate their class claim pursuant to the agreement at issue in that case.

• In Brown v. Trueblue, Inc., 2012 WL 1268644, *16 (M.D. Pa. Apr. 16, 2012), the court distinguished and refused to apply the Board’s decision because, “[b]oth arbitration agreements at issue here prohibit classwide arbitration; however, they leave open the door to collective actions in other forums.”

• In Morvant v. P.F. Chang’s China Bistro, Inc., 2012 WL 1604851, *9 (N.D. Cal. May 7, 2012), the court rejected the plaintiffs’ argument that the employer’s arbitration policy was void under the Board’s decision because it prohibited class claims. The court explained that the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) holds that, “collective arbitration is contrary to the purposes of the FAA and thus the FAA requires not just compelling arbitration, but compelling arbitration on an individual basis in the absence of a clear agreement to proceed on a class basis.”

Accordingly, at this point, while the GC is aggressively pursuing charges alleging that class claim waivers violate the NLRA, several courts have refused to fully embrace that concept and, instead, have enforced the waivers, in whole or in part. Accordingly, employers need to appreciate that, at this point, the validity of class claim waivers remains a hotly contested issue.