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Sep
2016
1

9th Circuit Joins 7th: Employees Cannot Be Asked to Waive Right to Class or Collective Litigation

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The Ninth Circuit Court has joined the Seventh Circuit and the National Labor Relations Board (NLRB) in finding that arbitration agreements restricting employees’ legal recourse are in violation of the National Labor Relations Act (NLRA). In the case of Morris v. Ernst & Young, LLP, the Ninth Circuit ruled that an employer cannot ask an employee to waive her right to concerted litigation (class or collective action) by requiring legal claims be brought individually through arbitration:

The Court held that concerted activity, is the “essential, substantive right” established by the NLRA…Given that Section 7 grants a right to engage in concerted activity and Section 8 precludes an employer from interfering with employees’ Section 7 rights, the Ninth Circuit concluded that an employer violates the Act by: 1) conditioning employment on signing an agreement that precludes collective and class actions, and 2) interfering with employees’ rights to engage in concerted activity.

Requiring workers to settle disputes through arbitration is a common technique used by employers to avoid litigation costs and prevent concerted activity:

Employment agreements requiring employees to submit workplace claims to an arbitrator rather than utilizing the courts have become increasingly commonplace. It is a favored tactic in avoiding or lowering the cost of litigation and an attractive way to prevent workers from realizing what they’re giving up. This tactic also abates these companies’ biggest fear, a class or collective action that gives workers a bigger say in how they are treated.

While the Ninth and Seventh Circuits agree with the NLRB, other appeals courts have ruled differently. As a result, these issues could be resolved in the U.S. Supreme Court.

One case directly affected by the Ninth Circuit’s decision concerns the company WeWork, which offers shared office space for a network of corporate clients:

[Tara] Zoumer had been newly hired by WeWork as an associate community manager in Berkley, Calif. and thought that she had found her dream job- until she found that her duties required more overtime than her salary allowed. When she turned to other employees for help and advice, WeWork waved the arbitration agreement at her including class action waivers, which she refused to sign…The WeWork case demonstrates how a union expert was needed to combat the signing away of overtime and of the right to collective action or class action lawsuits.

Like many new startups, WeWork tries hard to promote a worker-friendly image. But this isn’t the only labor issue that has the company in hot water. Last week, the NLRB declared sections of the company’s employee handbook unlawful:

The board argues that several provisions within the 22-page handbook are unlawful. One section the board takes issue with is titled “Do the right thing” and tells employees in considering whether an action is inappropriate they should ask themselves “how would I feel if it made headlines in news outlets,” among other things. It also flagged a section titled “outside activities,” which tells employees not to pursue them if they “create a conflict of interest that may interfere with the objective exercise of judgment in the best interest of WeWork .”

The NLRB has yet to file an official complaint with an administrative law judge.

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