A new ruling finds that certain arbitration agreements violate federal law.
A recent ruling from the Ninth Circuit of Appeals — the federal appeals court for California and other states — issued a ruling on arbitration agreements that will likely be very helpful to employees who wish to sue their employers for wrongful termination, harassment or any other reason. The case deals with arbitration agreements, which often prevent employees from filing lawsuits against their employers. In a surprising ruling, the Ninth Circuit found that requiring employees to sign certain arbitration agreements is a violation of federal law.
What Is An Arbitration Agreement?
An arbitration agreement is a contract — or a clause in a contract — where an employee agrees to bring any legal claims that it may have against his employer to an arbitrator, rather than filing a claim in civil court. In court, legal matters are decided by judges and juries. In arbitration, the claims are decided by an arbitrator, who is chosen by both of the parties. An arbitrator is often a lawyer; the criteria for qualifying as an arbitrator varies by state.
Arbitration is usually more favorable to employers than to employees. That is because the parties do not have the ability to gather as much information from each other as they would in a lawsuit, and because the decision of an arbitrator can usually not be appealed. Employers also tend to appear before arbitrators more frequently, so they often are able to choose arbitrators who are more friendly to employers. This is why many employers ask employees to sign arbitration agreements upon being hired.
The Ninth Circuit’s Ruling
In the case of Morris v. Ernst & Young , employees at Ernst & Young were required to sign an arbitration agreement that prohibited them from pursuing any class action claims. Class action lawsuits are when a group of similarly-situated people — for example, all employees who were discriminated against because of their age — band together to file a lawsuit against a company or organization. Class action lawsuits can often be helpful in showing a pattern of conduct; if just one employee claims that they were discriminated against because of their age, it may not be believable. But if 50 or 100 employees make similar claims together in one lawsuit, it tends to show a pattern — and it typically makes for a much stronger case.
The arbitration agreement at issue in this case required employees to resolve any claims through individual arbitration actions. This would make it much more difficult for employees to show a pattern of conduct, and would lower the probability of winning their individual cases. In a surprising ruling, the Ninth Circuit found that this type of agreement violated the National Labor Relations Act (NLRA) because it interfered with employees’ ability to engage in concerted activity for mutual aid and protection. In other words, because these agreements forbade employees from banding together to help each other, it violated the law.
This ruling stands out because most courts — including California state courts — have found that these types of agreements do not violate the NLRA. It creates uncertainty as to how these agreements will be enforced in California. If a group of employees files a lawsuit in federal court, it will likely be permitted. If the case is filed in state court or in a different federal court, it will likely be prohibited and the employees will be required to go to individual arbitration.
This ruling is an important victory for employees whose employers have required them to sign an arbitration agreement that requires them to resolve all claims through individual arbitration rather than through any sort of joint action. However, not all employees will be able to take advantage of this ruling; it only applies to cases brought in federal court within the Ninth Circuit (which includes California, Washington, Oregon, Alaska, Arizona, and Hawaii). A skilled lawyer will be able to evaluate the facts of your case to determine if you can bring your case in one of these federal courts.
At PLBH, our talented employment law attorneys have experience handling cases in arbitration, mediation and in court. We offer free initial consultations to evaluate your case, and we may able to handle your case on a contingency fee basis — which means that you do not pay us unless we recover money for you. Contact our office today at (800) 435-7542 or info@plblaw.com to learn more about how we can help you with your employment law case.